Q&A: Selling A Mitchell-Lama Unit

Q&A: Selling A Mitchell-Lama Unit
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.

“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.”

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42 Comments

  • 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?
  • 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
  • My Grandmother passed and owned one of these apartments. This blog has been very helpful. thank you
  • 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.
  • 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?
  • 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.
  • 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?
  • 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.
  • 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..
  • 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.
  • 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?
  • can I transfer my shares to a not for profit organization, such as a school or a religious organization?
  • 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?
  • 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
  • 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
  • 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.
  • If my son, who is over 18, is living with me and is not on the stock certificate but is bequeathed the apartment and is residing in it will it go to him upon my death?
  • I received a letter from the management of the Mitchell-Lama coop that my turn had come, and I could see that 2 bedroom apt. I was waiting for 10 years. Manager showed me the apt which was in a very poor condition, dirty, not livable: floors and some woodwork broken, unpainted walls... In the letter i received from management it was said THE APARTMENT IS SOLD AS IS. What are the conditions the apt must be by the rules of HPD
  • How long can Mitchell lama hold onto the money owed on returned shares?
  • RIDICULOUS ORGANIZATION on Thursday, September 11, 2014 4:07 PM
    I have a problem believing what they do is even legal most of the time. When you leave the apartment, they take 3 months from your equity and then give you a hard time giving your money in every way. They should be investigated by the feds.
  • I know a friend who is listed as living in a Mitchell lema building , but moved to Chicago I have his address but he is sub leasing his Mitchell Lema apt for the last 3 years. Is this illegal?
  • I'm on a wait list for 2 different Mitchell Lama co-ops. When I'm called & I decide to move in will I be able to deduct the monthly maintenance fee? Thank you.
  • If any of you are still looking at this board, I think I have a few answers to your questions. Brad, what your friend is doing is illegal. When/if it is found out, he will lose the apartment. To the "Unknown User," to protect your son, all you need to do is add him to the stock certificate. It can be changed. To the "housewife" They are definitely supposed to fix the apartment up and you should contact someone about this and have them restore the apartment as required.
  • Must there be two lawyers to transfer limited coop shares from one unit to another?Interested in adding my disabled adult child,as a result of 9/11,on the new shares.
  • I recently moved into a Mitchell Lama Co-op in NYC. I paid a surcharge over and above the basic carrying charges because my income is over the lower income but not above the maximum limit. The managing agent provided the percentage of the surcharge (not the basic carrying charges) that must be remitted to NYC and indicated it does not know if it is deductible or not on the Cooperator's tax return. So the question is the portion of surcharge that was remitted to NYC deducted as real estate tax? Thanks
  • My mom died recently at 94. She was supposed to put her grandson on the affidavit and never took care of it. Is there anyway of fighting this to keep the apt?
  • My mom passed away a year ago. I want to remove her name from the Stock Certificate, I also live in the apartment. What documentation from Mitchel-Lama do I need
  • Hi, Important question: Once you've received your apartment through the Mitchell-Lama program, are you allowed to remove a hallow wall that's not part of the overall building structure? Thank you.
  • My father in law is sickly and we are concerned about him passing. My sister in law still lives in the apartment for is not on the stocks. Management claims that as of Jan 1st, 2015 that no one can be added to stocks anymore and that succession paperwork would have to be filed. Can anyone confirm this?
  • Hello, we have a similar problem - my stepfather suddenly passed away few weeks ago, my mother lived with him for 16 years. He didn't take care about putting here on the affidavit - but they e.g. both filed joint taxes together, etc. Is there any way how to fix that, so my mother doesn't loose the flat where she lived for last 16 years? Thank you.
  • I moved out of a co-op o the end of Jan. The people that are waiting for my apt. are still waiting after all this time. I was told that the info goes to the state and when then the new owner gives the money to buy the unit, it will then take another 3 weeks for me to get the money I put in back minus the three months. It seems to me that this is taking a very long time. The apt. was left in good condition so there shouldn't be any problems on that end of it.
  • Do you know if the board of members of the board must be Share holders and have a stock certificate under their names to be on the board?
  • My brother passed away August 31, 2017 and he was a co-oper @ Rochdale Village Jamaica NY. When we went to sit down with management, we were informed that the deposit my brother put down in 1992 is all that can be expected to be gotten out of the apartment he lived in for 25 years. My brother owns shares however we were told that the shares do not accrue any value above what he paid as a deposit. To add insult to injury, they are withholding the one month vacancy rent, rent for September and October since his grandchildren reside out of state and the courts maintain they are the ones who have to petition for administrator of his estate. Then they say from the remaining amount of his deposit, they will deduct any repairs to the apartment. I cannot conceive of any development where shares accrue no value. Why issue share to the Co-opers if there is no value attached? I keep reading about mortgage amortization and would like further clarity over how that impacts the shares my brother owned in Rochdale. Does that mean that a portion of the complex's interests and share value belongs to him based on his owning shares? Please explain the amortization clause to me where his shares are concerned. My grandnieces and grandnephews are seeking legal representation however we need to know if it will even be worth obtaining legal representation if they can only get back what remains of the deposit their grandfather made back in 1992. I thank you for answering my query and await your response as soon as possible.
  • My maintenance is $740.00 a month. What is the maximum surcharge I can be charged on this amount? Also is there a website that has a calculator that I can plug in numbers to calculate my surcharge?
  • I am a 32 year trident of Parkchester Preservation Management, LLC living on SSDI for 28 of these years. This condominium complex is part of the Michel- Lama Apts and are taking 85% of my SSDI check and raise my rent yearly in spite of lack of repairs, vermin and mice in the complex. They have been under " renovations" for over 15 years. They received federal grants to remove asbestos. Grants to renew plumbing and electrical system. Grants to change to thermal Windows. They pass on these costs to all residents in spite of receding this government funding. They have forced out the disabled by refusing public rent assistance programs that pay fair market rents. Legal aide was of no help to me. What can I do to get reimbursed for my damaged rugs and property from several water leaks and poor repairs.
  • Parkchester is making people homeless and they only care about profits. Don't move here. Especially with children. Closed theaters and bowling allies. No community center or safe activities for families. Commercial merchants raise their products and services to patrons. Small businesses have closed and moved elsewhere. Poor security measures. Fires. Assaults. Robberies. Not worth maltreatment and disrespect from Parkchester Management.
  • My sister lived in Co-Op City, in the Bronx. She passed away in July 2017, I became voluntary executor of her State. She kept this apartment spotless, and did not make any changes except adding a light shine coat to the living room floor. When the inspector went to check apartment and we did the walk through, he pointed a few minor things, and said things were pretty good. After months of waiting and following up and asking about the refund of the deposit due to her, I finally received the check...and they took 50% !! claiming repairs and other unexplained fees. $4,000 for a new floor ( they said the coating she used could not be taken off, so the complete floor was damaged). That is false, and I can prove it. Does anyone know if there is a department that regulates what repairs fees can be charged and how much? If these repairs are legit, there should be a table with each cost, so everyone moving in knows what will cost to move out, simple information. At this point, it seems someone simply decides to make some money out of the people moving out, that is not right. This is simple abuse. Any information will be greatly appreciated.
  • Hi I have a question as a shhareholder. Our NYS MItchell Lama Development is (In NYC )taken a needed bank loan to cover major repairs. There was no shareholders meedting or voting on this Capitol improvement. The board has not yet decided on how to treat this loan for the shareholders carry charges. By a rent increase or a loan. The IRS said to me that if a loan I cannot take this deduction on my taxes because the building is doing major repairs and not the shareholders apartments. Another item is that in this Developement are shareholders who are on Screi . How does this loan apply to them?
  • So is a Mitchell Lama so governmentally entwined that the Mitchell Lama Corporation must have cause for termination of any lease, including any garage license agreement? That is can Mitchell Lama tow my car away from garage after terminating my license agreement to park in said garage for no cause-- and do all this without going to Court to get Judgement and warrant of eviction?
  • My mother passed away December 8, 2020. I am the executor and sole heir of her estate. Unfortunately, I was unable to move into her Co-op because I wasn't listed on her income affidavit since I moved out 9 years ago. Thankfully my mothers Co-op was sold two months ago, but the equity check has not been processed and I keep getting the run around whenever I call/email the property manager. Can anyone offer advice on what I can do to expedite the process? I am willing to take legal action is necessary/possible.
  • I am cooperator in Mitchell-Lamma program. I am the head of the household not sharing my dwelling. I want to leave the program/moving out of NYC I made an investment of $20,000 on renovations of the dwelling. How long in advance i have to notify the property management my departure from the dwelling? I saved the receipts of the money invested on the renovations. Do Iget reimbursed fully or partially on the investment?
  • We moved in a co-op in 2017 paying $30,000.00 for one bedroom apt. Had no children not even overnight visitors. The elevator was being replaced and we were told it would take 2 or more months. My husband was diabetic, high pretension, had heart failure along with a heart difibilator needing care at all times. We were told he would be taken from the 6th floor by appointment in a chair by 2 men down the stairs. We chose to visit our children out of town. He was hospitalized several times so we decided to remain in NC, because he couldn't travel. I called the management and informed them , we would not be coming back. I wa told I would hear from them when they did a walk thru but I never did get that call I called several times only to be told something different each time. It was over a year and I kept calling. I was even told that we never ever lived in the apartment. After numerous calls the head office had to call to get the manager to answer. I get a bill for over 30,000.00 for putting in new wiring, knocking holes in the wall, a dish washer, new fixtures and several other things that I never had. My husband died 5/22 and I feel this is unfair for seniors to be treated like this. I received a check but not even near the 30,000.00 we paid, but a bill for those new things. there were no damage to the apartment by us. we had none of the new changes. Managers should not treat people like animals. we are humans too. Are we responsible for improving the place . when it is for the sake of the manager to pocket the funds.