Home ownership is part of the American Dream. A dream that many families hope to pass down through generations. But unlike a deed to a single-family home in the suburbs, shares in a cooperative in New York City are not as easily transferred. After all, shares in a cooperative are personal property, not real property, and cooperatives are governed by a board of directors which is entrusted with carrying out the cooperative’s best interests and enforcing the provisions of its corporate documents.

Passing a cooperative apartment to another depends on the nature of the cooperative, such as whether it is privately owned or publicly funded, and whether the applicant can satisfy their respective requirements. Each type of cooperative has its own nuances.

Private Cooperatives

A shareholder in a private cooperative is issued shares in the cooperative corporation and a proprietary lease which sets forth the respective rights and obligations of both the cooperative corporation and the shareholder-lessee. Among those terms is what happens to the shares and the apartment upon the death of the shareholder.

Most provisions distinguish between a transfer to the shareholder’s spouse, for whom no board approval is required, a financially responsible member of the shareholder’s family, for whom board approval may not be unreasonably withheld, and everyone else, which requires board approval.

These categories seem self-explanatory, but sometimes the familial relationship is not so clear. The status of “spouse” refers to a person legally married to, or having a domestic partnership agreement with, the shareholder.

The status of “family member” refers to a shareholder’s children, siblings, parents, and the like, and may include “non-traditional” family members who demonstrate an emotional and financial interdependence with the shareholder. Courts have repeatedly upheld the application of different rules to these different categories by cooperatives.

Publicly Funded Cooperatives

The most common publicly funded cooperatives are limited profit housing companies under the Mitchell-Lama housing program, for which a shareholder is issued shares and (typically) an occupancy agreement. Like a proprietary lease, the occupancy agreement sets forth the rights and obligations of the cooperative and the shareholder-lessee. These cooperatives are regulated by either New York City or New York State administrative agencies, which have their own regulations, and have a somewhat different approach to keeping an apartment in the family. To qualify for the transfer of shares in a Mitchell-Lama cooperative, an applicant must prove their entitlement to succession.

Like a private cooperative, the first requirement is that the applicant is a family member, though no distinction is made between a spouse, domestic partner, or other family members, including non-traditional family members. Unlike a private cooperative, the family member’s financial status is not a factor.

The second requirement is that the applicant and the shareholder co-resided in the apartment for either one or two years (depending on whether the applicant is a senior citizen or disabled) immediately prior to the shareholder’s death or vacatur. Finally, the applicant must show that they have continued to maintain the apartment as their primary residence after the shareholder dies.

The Proof

Regardless of the type of cooperative, eligibility for the transfer of shares or succession rights is generally demonstrated through submission of documents to the cooperative’s board or managing agent. Live testimony is not permitted, though sworn affidavits may be offered instead. Records such as birth certificates, marriage certificates, domestic partnership agreements, and adoption certificates are used to show a traditional family relationship.

Establishing a non-traditional family relationship is more challenging, but is often supported by a will, health care proxy, power of attorney, bank, credit card, and investment statements for joint accounts, and sometimes subjective items like photographs and personal letters.

Evidence that the applicant held themselves out to others as a family member, participated in family functions, and behaved in a manner evidencing a long-term and committed relationship is relevant to the determination. Objective documents are most persuasive, since they do not contain self-serving statements.

Because Mitchell-Lama cooperatives require that annual recertification forms be completed and submitted to management, on which a shareholder must list each occupant of the apartment, they are examined to verify that an applicant is included as a member of the household. However, they are not conclusive, and other corroborating documents must be furnished, whether to bolster proof of occupancy or to overcome the absence from the recertification form.

Documents submitted in support of a transfer or succession application are examined, analyzed, and compared with any contrary information the cooperative may have. Based on this review, the cooperative may approve the application, ask for additional information, or deny the application.

The Tools

Sufficiency of proof is the main criterion when evaluating requests for a transfer of shares or to qualify for succession. Some tools which can facilitate the process include:

1. Establish a clear policy and written instructions for qualifying as a transferee of shares or to have succession rights.

2. Give adequate time for submission of the application and supporting documents.

3. Require certified documents where possible, to avoid submission of false documents.

4. Offer a suggested list of documents that the cooperative considers persuasive to ensure all applicants know what to provide and are treated equally.

5. Require that maintenance be paid during the period when the application is being considered.

Cooperatives should consider performing an annual or periodic survey of shareholders and require them to submit current emergency contact information both for themselves, family members and others occupying the apartment. Surprisingly often, unknown to the cooperative, a shareholder has passed away and the apartment is occupied by family members or others, sometimes for years.

As long as maintenance is being paid, family members can “fly under the radar” without going through the formality of transferring shares.The passage of time makes the application process more difficult as documents for relevant time periods are harder to obtain. Cooperatives may also have to deal with unknown occupants residing in an apartment.

Other Thorny Issues

In some instances, a shareholder dies but no one submits an application for the transfer of shares. If no estate is formed for the deceased shareholder, the cooperative must petition the Surrogate’s Court to have the Public Administrator (PA) appointed as the estate fiduciary. The PA then becomes responsible for taking actions on behalf of the estate, including inventorying and removing property from the apartment, surrendering possession of the apartment for regulated cooperatives, marketing the apartment for sale for unregulated cooperatives and paying maintenance charges due to the cooperative.

The situation is more complicated if the shareholder dies inside the apartment, as it is immediately sealed by the NYPD and no access is permitted until the seal is removed. A request can be made for family members to have access to the apartment, but only for the purposes of retrieving burial clothes, searching for important documents, or performing required maintenance or repairs.

If there is an occupant of the apartment who has either not applied for or who has been denied the transfer of shares, the cooperative must bring an eviction proceeding against the occupant (considered a licensee) and the PA, who stands in the shoes of the deceased shareholder, to get legal possession of the apartment.

Applicants whose applications have been denied may assert claims of discrimination. Recently, a claim of discrimination based on marital status was rejected by the New York Court of Appeals since the definition of “spouse” is clear and was properly applied by the cooperative when it considered the applicant’s request for the transfer of shares. Cooperatives should be prepared for such claims and be able to defend their decisions.

Evaluation of a non-traditional family relationship can be challenging, as it turns on showing an emotional and financial interdependence between the shareholder and the applicant. Some proof is objective, such as a will, power of attorney, health care proxy, and shared accounts, and other proof is subjective, such as testimony of friends, photographs, and personal correspondence. In some cases, a relationship may be quite close, such as that of a companion, caregiver, or godchild, but these relationships are not the equivalent of being a family member.

Occurring more commonly in applications submitted to regulated cooperatives, applicants sometimes rely on manipulated or fabricated documents to establish family member status, financial eligibility, or co-residency. Investigations have exposed these falsehoods by comparing the submissions with certified documents obtained from official government sources. Documents which appear to be internally inconsistent (for example, the use of different fonts or the spelling of names and words) should be viewed with skepticism.

Conclusion

When the family home is a cooperative apartment, passing ownership to successive generations can be onerous and complicated. Bequeathing cooperative shares in a will does not avoid the necessity to apply for the transfer of those shares, as only their value is devised, not the right to occupy the apartment. Nonetheless, even if an applicant’s transfer request is not approved, the estate beneficiary should still receive the value of the shares from the sale of the apartment, less any sums owed to the cooperative. At least some facet of the deceased shareholder’s wishes is met.