Cooperative apartments in New York are common. What happens when an owner of a cooperative apartment dies? This article examines some of the basics of cooperative apartments and what can happen in New York probate upon the death of an owner.
What Does Cooperative Apartment Mean?
Owning a cooperative apartment is different than owning a house or condominium. Cooperative apartments in New York are not real property. The owner owns shares in a corporation, and the corporation owns the property. Shares in a cooperative apartment are personal property. The owner of the shares has a proprietary lease for their particular apartment. This treatment of cooperative apartments in New York probate differs from how co-ops are treated in Florida probate.
Can You Inherit A Cooperative Apartment In New York?
You can inherit the shares in the corporation, and the proprietary lease on the cooperative apartment, but not the cooperative apartment itself.
What Happens When a Co-op Owner In New York Dies?
When a cooperative apartment owner dies in New York, the probate court will likely become involved. The shares of the cooperative will be controlled by the decedent’s estate (unless the cooperative apartment was jointly owned and decedent’s interest passes directly to the joint owner). The cooperative apartment interest will either pass under New York’s intestacy laws or under the terms of the will.
The administrator of the New York estate and ultimately the beneficiary of the shares become subject to the rules and regulations of the corporation, and the terms of the proprietary lease. Under New York law, cooperative corporations generally have broad discretion to approve (or disapprove) a transferee of ownership shares. This can sometimes be a problem for beneficiaries, as illustrated by the following case study.
In Terzo v. 33 Fifth Avenue, two sons, Michael and Robert, inherited a New York cooperative apartment from their parents. The family had lived in the co-op for decades, and the parents became shareholders and proprietary lessees in the 80’s. After the death of the last parent, one son wanted to stay in the cooperative apartment. The other son lived in Pennsylvania, and did not want to move to or live in the cooperative apartment.
The sons jointly applied to have the cooperative apartment (shares and proprietary lease) transferred to them. Their application was denied. The board’s reasons were that:
The board believed that only Michael met the requirement of financial responsibility. Since the application was on behalf of two separate families, their children (three total), and one nephew, defendant believed occupancy would exceed the number of couples who are permitted to live in a single apartment at any one time, without board consent, even though Michael did not intend to live in the apartment. Finally, the board disfavors nonprimary occupants as lessees and since Michael does not intend to presently live in the apartment as his primary residence, this would make the apartment his pied-à-terre.
Ultimately the courts determined that the corporation breached the terms of the proprietary lease, which stated that transfer of the cooperative apartment to a financially responsible member of the decedent’s family would not be unreasonably withheld. The sons were eventually permitted to own the New York cooperative apartment shares after the death of their parents.
Issues concerning cooperative apartments are common in New York probate. It is essential that the rules and regulations of the corporation, and the terms of the proprietary lease, are examined and complied with to make the smoothest possible transition after the death of an owner.