Inheriting Co-op Shares Legal and Procedural Considerations

Say you and your spouse own a single-family home. You’ve got two grown kids and a couple of grandchildren. When the time comes, assuming your will and other end-of-life documents are in order, seeing to it that your property and assets are passed along as you wish is a fairly straightforward process – a home is real property, after all, and laws of succession were practically invented to assure the transference of such property to one’s heirs without a lot of hassle. 

But co-ops are different; co-ops are not owned outright the way single-family homes or condo units are. Living in a co-op means that you’re a shareholder, not a property owner, and that the monthly maintenance dues you pay to your cooperative corporation entitle you to occupy one of the units in your building. But that being said, can one leave a co-op apartment to one’s heirs? Can one inherit co-op apartment shares?  The short answer is yes – shares in any corporation are inheritable.  But overall, inheriting those shares may be a bit more complicated than it looks at first glance.  The complications, if any, usually lie in the proprietary lease.  

First, Look to the Lease 

Phyllis Weisberg, a partner with Manhattan-based law firm Armstrong Teasdale explains;  “In most cases, a review of the proprietary lease will provide answers to your questions. The lease is not relevant where the transfer is by operation of law – that is, where one of two joint tenants or tenants by the entirety dies and the survivor takes all. But the lease will typically have a provision dealing with transfers on death. The lease may provide that a transfer to a spouse does not require [board] consent, or it may provide that the board ‘will not unreasonably withhold consent to a financially responsible spouse.’ Some leases will not deal with the spouse separately, but provide that the board ‘will not unreasonably withhold consent to a transfer to a financially responsible member of the family,’ [though] sometimes it is limited to immediate family.”

 Philip T. Simpson is an attorney with New York City-based law firm Robinson Leinwand Genovese and Gluck.  “The issue usually turns first on the language of the proprietary lease. Does the proprietary lease make an exception to the usual requirement that the co-op board approve all transfers for cases involving inheritance from a deceased shareholder?  Some proprietary leases make an exception; others do not.”

About Those Exceptions...

 “If there is no exception,” continues Simpson, “then a person seeking to inherit has to go through the same process as anyone applying to purchase a co-op unit.  If there is an exception, then questions arise concerning who falls within that exception. The proprietary lease could refer to ‘immediate family’—which is an unfortunate phrase, because there is no clear definition—or it could describe with particularity people who come within the exception.  A better alternative to ‘immediate family’ is for the proprietary lease to describe with particularity the classes of people who fall within the exception. These can include spouses, adult children, parents, or other specifically delineated classes of people.” 

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