Co-Op Boards Can Haunt an Estate

How to handle an estate’s interest in a cooperative apartment is a surprisingly common problem that’s generally under-discussed.

A recent article from The Cooperator, featuring commentary from real estate attorney Stephen M. Lasser, offers a fairly comprehensive overview of the major issues that can arise when the owner of a co-op apartment passes away.

The first question in determining who gets the apartment is to examine the deceased owner’s stock certificate to determine if anyone else has an ownership interest in the property. If there are additional owners, then how the deceased’s interest will be disposed of depends on the nature of the stock ownership (this relationship should be spelled out fairly clearly on the certificate and/or the lease).

If the stock was owned as joint-tenants with rights of survivorship or tenants by the entirety (uncommon and only applicable to husbands and wives), then the surviving owner takes title, and the stock never becomes part of the decedent’s estate. End of story. If the apartment was owned as tenants-in common, however, the decedent’s interest would become part of his estate.

Assuming the decedent either owned the interest alone or as part of a tenancy in common, the stock becomes part of his estate and should be disposed of like any other estate property. First we look to his will. If there’s no will or, then proceed to intestacy, which can produce fairly varied results based on the law in that particular jurisdiction.

Thus far, none of this is all that out of the ordinary. However, that’s where the co-op board comes in. That’s right, they drive you crazy during life and can continue to do so even after you’re gone. Just because someone inherits an interest and lease in a co-op apartment, that doesn’t necessarily mean they’re allowed to occupy it without approval. In certain circumstances, the power to decide still rests with the co-op board.

Ultimately, this relationship is defined by the language in the co-op’s proprietary lease. Usually, such documents don’t require board approval for transfers to surviving spouses. Many extend this protection to other family members, subject to certain conditions being met (generally related to the financial responsibility of the family member in question and whether they cohabitated with the deceased for a defined period).

It’s important to note however, that an individual who inherits an interest can still sell it to an unrelated third-party without actually taking title or occupying the apartment. Any mortgage in place on the property would then have to be paid off at the time of the sale. However, any such sale will still be subject to approval by the co-op board. Just can’t get away from those guys.