Nothing Is Certain but Death and...a Co-op Board’s Power

A couple living in a co-op wanted to leave their apartment to their adult daughter, who grew up in the apartment but now lives out of town. The co-op board refused the request. The couple poses this question to the Ask Real Estate column in the New York Times: “What’s the point of having a will if we can’t leave our apartment to our child?”

The answer is that the co-op board might have the power to block the inheritance. If the couple owned a house or a condominium, they could bequeath the property to their daughter and she could do with it as she pleased – move in, rent it, or sell it. But a co-op is not real property. Instead, residents own shares in a corporation with a proprietary lease to their apartment. The co-op board has the final say in whoever takes over the apartment and ultimately lives in it. 

As shareholders prepare a will, they should ask their lawyer to review the co-op’s governing documents. In some co-ops, transferring an apartment after death to certain family members, like a spouse or an adult child, does not require board consent. However, most co-ops do require the board to approve the transfer to a financially responsible family member. 

“The board might be concerned about the daughter’s ability to afford the apartment after the parents are deceased – or whether she intends to actually use the apartment for herself,” says attorney Lisa Smith, a partner at Smith, Gambrell & Russell. 

It sounds like the co-op in question here requires consent, and the board intends to exercise its power. Should the deceased couple’s daughter decide that she wants to move in, she would have to submit a board package, a dossier of financial and personal information, for review. She may also have to pass a board interview. The process would not be unlike what prospective buyers endure. The board wants to know that the person who takes over the apartment can afford it, and the board has the power to make sure its concerns are satisfied. 

In the end, the daughter might pass muster with the board. However, if the board rejects her application, then her deceased parents’ estate would likely sell the apartment and dispense with the proceeds as the will dictates.