—Skeptical of New Buyer
“Although corporate and LLC forms of ownership are now permissible, many cooperatives still refuse such forms of ownership. Placing shares and a proprietary lease under such forms of ownership may serve a useful purpose to the individuals, who would otherwise be the shareholders, for estate planning, Medicaid and other purposes. The problem with such forms of ownership is how can the apartment corporation control who will actually live in the apartment? Control can be accomplished by requiring the corporation or LLC to disclose the individuals who will reside in the apartment, interview those individuals, and for an agreement to be entered into with the corporation or LLC that occupancy is limited to those individuals.
“Additionally, boards will generally try and place limits or even an absolute prohibition on the ability of the corporation or LLC to sublet. Another consideration is obtaining personal guarantees of the maintenance and other obligations of the proprietary lessee, where the LLC or corporation is a single asset entity created solely for the purpose of owning the shares allocated to the apartment.
“Where the LLC or corporation is not a single purpose entity, it is possible for the apartment to be affected by the claims of others such as creditors of the entity or bankruptcy filings. It is therefore preferable that the entity be solely created for such purpose. This matter should clearly be run past the apartment corporation’s attorneys for review and for the preparation of necessary documents. All costs of review and document preparation should be borne by the shareholder making the request.”