Death of a Shareholder – Having No Family Does Not Mean Profit for the Cooperative
When a deceased shareholder of a cooperative apartment has a family member, an administrator or an executor of his or her estate, the disposition of shares (i.e., the ownership of the apartment) is generally pretty straightforward. The shares may be transferred to a qualifying family member or maybe sold on the open market to a third party.
But what happens if there is no will? No family? Can the cooperative simply sell the shares of the apartment for its own benefit? Generally speaking: No!
The cooperative must petition the Surrogate Court of the county in which the shareholder resided or where the property is located to have the Public Administrator of that county appointed as the administrator of the estate of the decedent. The Public Administrator then, in essence, stands in the shoes of the deceased shareholder (with the exception of being able to vote or occupy the apartment) and has a fiduciary duty to sell the apartment at the best market rate possible. Once the sale is complete, the cooperative is “made whole” for any arrears, flip tax, or other expenses associated with the sale of the apartment, including the appointment of the public administrator. Any equity remaining after the sale is distributed to the beneficiaries of the estate or, if there are none, to the state of New York.
The upside for the cooperative is not only that after the apartment is sold, the arrears and its out-of-pocket expenses are recovered, but also that the purchaser will presumably be a maintenance-paying member of the cooperative community.
If you have an aging population in your building, it is encouraged that shareholders provide family contact information to management (or the board) to possibly expedite the above process and save on unnecessarily incurred maintenance or other expenses on a vacant apartment.