Partner, Gallet Dreyer & Berkey
Succession rights. Mitchell-Lama cooperatives were established back in the 1960s to allow low- and middle-income families to own co-op apartments. The law gave developers a tax incentive and low-interest mortgage, and it allowed them to pass those savings to the shareholders. Because Mitchell-Lama apartments are very sought-after, the only way to get in is to be on a waiting list or qualify for succession. Succession happens when a shareholder dies or simply vacates the apartment, and it requires two things: The successor must be a family member of the shareholder of record, and he or she must live in the apartment for a requisite period of time.
Court clash. At a large Manhattan Mitchell-Lama co-op, a son applied for succession after his parents moved to Florida and left him behind in the apartment. The application was denied by both the co-op board and the Department of Housing Preservation and Development (HPD), the agency that supervises city Mitchell-Lamas, on the grounds that the son had not demonstrated that he’d lived together with the shareholders of record for the required two years before they permanently vacated the apartment.
The son appealed, and the State Supreme Court ruled that because the co-op had accepted rent payments and sent invoices and repair bills to the son over a number of years, the board was prevented from trying to evict him or denying succession. The appeal got appealed, and the case finally went in favor of the co-op.
Know thy neighbors. It comes down to knowing who your shareholders are and who your occupants are, which can be a big hurdle. A lot of reliance is placed on managing agents and doormen and superintendents to pay attention. So the board needs to be aware of who’s coming and going and who’s living in apartments, without being a police force.