The proprietary leases in most housing cooperatives outline what should happen in the event of a shareholder's death. The terms of those leases, as well as the shareholder's will (if they left one), determine how to proceed with a post-mortem transfer of shares in the co-op corporation.
"Some proprietary leases require a board to allow transfers to spouses, domestic partners, and/or other family members," Jeffrey Reich, a partner at the law firm Schwartz Sladkus Reich Greenberg Atlas, tells Brick Underground. "Other proprietary lease impose a 'reasonableness' standard on a board’s decision to approve a transfer to a 'financially responsible' spouse, domestic partner or family member. Yet other forms of proprietary lease leave the approval of all such transfers to the discretion of the board."
Therefore, when a cooperative shareholder passes away, the heirs need to review the terms of the shareholder’s will, if any, and the terms of the cooperative’s proprietary lease, says Reich. If the heirs named in the will want the apartment and are qualified financially to take it on, it’s likely they'll be approved by the co-op board.
"However, if they’re not qualified financially according to standards that the building deems appropriate, then they will not be approved as the owner, and the estate will be asked to sell the unit," says Deanna Kory, a broker with Corcoran.
"If the decedent’s heirs are neither a spouse nor a family member – or even if they are, but choose not to take ownership in their own names – then the executor or administrator of the decedent’s estate can sell the apartment on the market, and the sale is subject to the approval of the board," says attorney Kevin McConnell, a partner at Himmelstein, McConnell, Gribben, Donoghue & Joseph.
If the shareholder died intestate, the matter goes to Surrogate's Court, which will appoint an administrator of the estate to determine how the shareholder's assets are to be divided among heirs.
These rules apply only to private co-ops, McConnell notes. Mitchell-Lamas and other government-regulated co-ops have their own sets of standards.
Thinking of buying a co-op or condo? Already bought, and not sure how co-op/condo life and rules work? Learn all about purchasing a place and living in your new community. It's not like renting, and its not like owning a house. What's it like?