Q&A: Selling A Mitchell-Lama Unit

By Andrew P. Brucker

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Q My mother recently passed away and I inherited her shares in a Mitchell-Lama co-op building. It's taken quite some time to run down the paperwork, and make preparations to empty the unit, and the building management has not been at all helpful. Today when I discovered that some tools were misplaced—or maybe missing—from the apartment, I called the management company and asked about the tools. The managing agent blew up, sent an employee to return my keys, and basically said "good luck" selling my shares, because the management is not required to show the apartment.

I'm obviously already grieving the loss of my mother, and I'm harried with other issues with settling her estate. I'm pretty much clueless about what steps to take to sell a low-income housing unit. I don't know with certainty the value of the shares, how to sell it, how to list it, etc. Can you please advise?

—Exasperated Shareholder

A “Mitchell-Lama housing was created many years ago by the New York Legislature (and it’s name derives from the two sponsors of the law),” says attorney Andrew Brucker of Manhattan-based Schecter and Brucker, PC. “The law, found in the Private Housing Finance Law, creates for low and middle income New Yorkers what are known as “Limited Profit Housing Companies,” and that is the key to the question asked.

“People who purchased an apartment in such co-ops paid very low prices. The co-ops also paid much lower real estate taxes and much lower mortgage rates, which meant the maintenance paid by shareholders was lower than conventional co-ops.

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“However, there was a trade-off. For such benefits, these co-ops agreed to allow a governmental agency to oversee its operations, and the shareholders also agreed that when they sell their apartments, they are limited in their profit (hence the name “limited profit housing company”). When a Mitchell-Lama shareholder leaves the co-op and “sells” his/her shares, they are only entitled to the amount they paid, plus any capital assessments, plus (depending on the policy of the particular cooperative) any mortgage amortization. The concept of “fair market value” and “appraisals” simply do not apply to such apartments.

“The New York City Mitchell-Lama rules are clear as to what happens when a shareholder passes away. The “lease and shares of stock for such decedent’s apartment shall be surrendered by the decedent’s estate or survivors for redemption.” The rules further state that “upon the death of a tenant/cooperator, the shares must be returned to the mutual housing company which will arrange for a sale pursuant to [these rules].” The rules also state that “the shareholder shall be responsible for carrying charges…for up to 90 days after surrendering possession of the apartment or until the housing company transfer the shares to the new owner, whichever occurs earlier.”

“It should also be noted that management maintains a waiting list for the apartments. In the event of death, the next of kin or executor of the estate is not entitled nor required to sell the apartment. Management and the co-op must sell the apartment using its waiting list to find a purchaser. The only obligation that the next of kin has is to inform management of the owner’s death, and to arrange to get the personal property out of the apartment. I would make sure that management has received in writing a notice of the passing, and the fact that possession is now being returned to the co-op. Remember, under the law, the estate is only liable for three months maintenance (at the most) after the apartment is made available for resale.

“As to the nasty behavior of the manager, and the complications he is creating, I would try to find the name of a board member, and pass along a note to him/her. Also, contacting the supervising agency, the Department of Housing Preservation and Development (“HPD”) in the case of a city Mitchell Lama (or the New York State Division of Housing Community Redevelopment, or “DHCR”) may be in order to preserve your rights.”

Comments

toonguy

What about a situation in which the cooperarr is not deceased? I have shared a Mitchell-Lama apartment with my father for ten years, and have been included on the income affidavit. If he wants to leave and make some other place his primary dwelling, is he allowed to sell the unit directly to me? Not transfer *we already know about the transfer progress), but sell the unit to me outright?

Ken

My mother was a Mitchell-lama cooperator having lived there for 60 years. She died in 2011. As her son and appointed voluntary small estate administrator with tax EIN I turned in the keys and received the reimbursement of amortization, capital assessment, equity less 3 1/2 months carrying shares and cost to refinish floors. I called the estate tax unit of IRS twice. they said to report this on a 1041 and 1041 D. They said the FMV of the apt would be the amount shown on the 1099. Normally this would be a wash but IRS said I could increase the basis cost by the cost of 3/1/2 months carrying charges and floor scraping and then report the resulting loss on two 1041 K1s split between beneficiaries my sister and myself. We would each have to then report this as a 1040 D loss on each of our 1040s up to a total of $3,000.00 (1500 each). Is this correct? If not is there anything else to do. IRS said there is no need for a 8949. I am trying to avid the cost of a CPA and or lawyer as the total value of this coop is rather low. Thank you for any advice or at least pointing me in the right direction

Cee-Cee

My Grandmother passed and owned one of these apartments. This blog has been very helpful. thank you

R. ADAMS

MY NIECE PASSED AWAY AND LIVED IN COOP CITY. I DID NOT BELIEVE THAT THEY WERE INTITLED TO DEDUCT 3 MONTHS FROM HER EQUITY UNTIL I READ YOUR REPORT. THANK YOU.

Emily Stone

The original management office added my son, at my request, under the uniform gift to minors act in 1993 to the reissued mitchell lama apartment stock certificate. He, now adult, is living in the apartment for the past 10 months. Management now claims minors can not be valid stock holders and he can not live there. Is this true?

an unknown user

I currently am caretaker for my brother who has a HDFC co-op. We too have been battling with a very uncooperative property manager for a year this month [10/2012]. My brother,74, took ill having to move to Virginia with me. We were never provided with any documents to relinquish his share but have been sending maintenance fees for a year to his building's property manager. (the most recent check returned w/o any explanation.) I'm not sure if HDFC falls under "Mitchell-Lama but I'm told that it does. No key or personal belongings were ever surrendered to us either. I'm my brother's Power of Attorney and sole caretaker and simply at a loss for my next move.

Cindy ALT

What happens if you have to move in as the caretaker of a family member? Do they charge you for being there in the apartment? do you need to be on the income affadavit?

newzev

On the estate tax return involving a Mitchel Lama apartment can 3 months maintenance plus fix up costs such as floor scraping be deducted and passed through as a k1 distribution to the beneficiaries.

an unknown user

Ken My mother was a Mitchell-lama cooperator having lived there for 60 years. She died in 2011. As her son and appointed voluntary small estate administrator with tax EIN I turned in the keys and received the reimbursement of amortization, capital assessment, equity less 3 1/2 months carrying shares and cost to refinish floors. I called the estate tax unit of IRS twice. they said to report this on a 1041 and 1041 D. They said the FMV of the apt would be the amount shown on the 1099. Normally this would be a wash but IRS said I could increase the basis cost by the cost of 3/1/2 months carrying charges and floor scraping and then report the resulting loss on two 1041 K1s split between beneficiaries my sister and myself. We would each have to then report this as a 1040 D loss on each of our 1040s up to a total of $3,000.00 (1500 each). Is this correct? If not is there anything else to do. IRS said there is no need for a 8949. I am trying to avid the cost of a CPA and or lawyer as the total value of this coop is rather low. Thank you for any advice or at least pointing me in the right direction Second request. Still hoping an accountant with Mitchel Lama coop experience will point me in the right direction..

Barbara Speregen

Can a Mitchell Lama coop management company charge $15000 to return a well kept coop apartment to its original state? My mother in law put in wall to wall carpetting, improved her bathroom and added cabinets inthe kitchen. Management is demanding this money quite adamtantly.

Inquirer

Does anyone know how much authority a Mitchell Lama Coop Board has to make regulations? i.e. making up a rule such as no cable installation on Saturdays? or licenced and insured workers?

an unknown user

can I transfer my shares to a not for profit organization, such as a school or a religious organization?

Vivian M.

can Management withhold the return of equity to my late mother's estate because the family that moved in has not sold their apartment yet? It doesn't seem fair as this is in addition to taking the 90 days of rent. Do I have any recourse?

Elizabeth

Can the management require you to replace cabinets that aren't broken but are more than 40 years old. management is currently replacing all of the cabinets in other apartments

bm george

can management charge you for replacing all tile in the apr because after 45yrs they dont have the old pattern only 12-tiles we damage 6-7 room apt

Janice Lorne

My mother passed away I have shares. Management told me that we were evicted and I have no shares because my daughter who lived there did not pay 3 months rent was evicted along with myself and 5 year old grandson we had been living there for over 30 years. Management says I have no rights? I need help desperately I am currently homeless & living in a garage.


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