In this world, nothing is a certainty but death and taxes. So how does a co-op or condo owner prepare for the certainty of death, as it relates to ownership interest and protect the asset for inheritance and possession purposes? Likewise, how does a board of directors exert control over who ultimately owns—as well as resides in—the apartment when a shareholder or deeded owner dies? One might think that it’s simply a matter of looking at a will to determine both ownership and possessory interests, but nothing in the world of New York real estate is ever simple. The type of ownership interest and, in the case of a co-op, the terms of the proprietary lease are crucial pieces that must be unraveled in the inheritance and occupancy puzzle that follows the death of a shareholder.
New York permits different types of ownership interests: tenancy by the entirety (for a legally married couple), joint tenants with right of survivorship, and tenants in common. In the cases of tenancy by the entirety and joint tenancy ownership, the other shareholder or owner automatically inherit the interest of the deceased owner. In the case of a tenant in common ownership, the decedent’s interest passes to his or her estate, and the terms of the will control the disposition of the property. If the surviving owner is already an occupant of the apartment or is a member of the immediate family or the spouse of the decedent, then possession should not be an issue of concern.
Complications often arise when the owner dies intestate or when a family member moves in after the death of the shareholder. A board should have rules and regulations in place to deal with these circumstances in order to prevent problems, complications and unnecessary litigation. There should be a fixed policy within the building that is adhered to when a shareholder or unit owner dies. The policy should be provided by the management company to the decedent’s representative within a reasonable period after the death of the owner. The policy should specify the estate’s obligations regarding maintenance payments, occupancy and, in the case of a co-op, how shares are transferred to the surviving spouse or heirs. If there is no movement on the part of the estate, either to resolve occupancy issues or to pay the accruing maintenance or common charges, within three months after the death of the unit owner, the board of directors should seek counsel to determine what legal steps, if any, must be taken.
A last will and testament may control the transfer of ownership, but it does not give an automatic right to occupancy of the apartment. If a shareholder or unit owner lived alone, then, under most circumstances, the heir cannot just move into the apartment after the death of the shareholder or owner. Typically, in the course of assignment of shares, the board has the right to approve the occupancy prior to the transfer. Yet, when it comes to an inheritance, the terms of the occupancy agreement will determine how much control the board has to approve the heir or whether or not the family member will have the right not only to own, but ultimately to occupy, the apartment.
Whether or not there is a will, a proprietary lease in a co-op will not terminate upon the death of an owner. Most cooperative boards permit family members to continue to occupy an apartment after the death of a shareholder, provided that they resided with the deceased shareholder prior to his or her death. But if the shareholder lived alone, no one can move into the apartment without permission of the board of directors. This includes the heirs, as well as the executor of the estate, whose sole purpose is to wind up the affairs of the estate, including removal of personal effects and sale of the unit. Maintenance payments continue to accrue, and the estate is liable for those payments. If someone occupies the apartment without the permission of the cooperative, the corporation may commence an action against the estate for a breach of the proprietary lease. Further, the cooperative cannot accept payment of the maintenance from anyone other than the estate of the shareholder, without risking an assertion of waiver, even if the proprietary lease states otherwise.