Inherit the Wind(fall): Passing-on Apartments when Owners Pass On

Case in point: At 90 Eighth Avenue in Brooklyn, a woman bought a co-op apartment in 2003 with the help of her grandmother, who was living out of state. Both women's names and were on the proprietary lease and stock certificate. A few years later, the woman decided to move. But before the apartment could be sold, the grandmother died.

Unfortunately, neither woman — nor, apparently, their attorney — had paid close attention to the wording of the lease. They could have requested that it call for "j oint tenancy with right of survivorship," which would have meant that the woman obtained full rights to the apartment if her grandmother died. Instead, the lease's language was for " tenancy-in-common," which meant the case had to go to probate court. It took about six months for the woman to be granted the right to the unit.

"It worked out in the end," says Dan Nickolich, treasurer of the co-op, "but it could have been really bad." He says the board didn't have to take any action in the case because the woman had paid her maintenance while waiting for the resolution.

Married…with Co-op

Attorney James Samson, a partner in Samson, Fink & Dubow, says residents and boards both should know what a lease calls for in case of death. Boards should, in addition, know specifically whose names are on the lease.

If the lease calls for "joint tenants with survivorship," the apartment automatically goes to the survivor. If the board tries to deny admission, you could be opening yourselves up to a lawsuit. "And worse," notes Samson, "they don't just sue for the transfer [of the apartment], they sue for violation of their civil rights and therefore open the board up to personal liability."

Married couples, and only married couples, can have leases with "tenancy by entirety," which means that if one spouse dies, their ownership interest evaporates, leaving the surviving spouse as sole owner. Board consent is not required for the surviving partner to remain in the apartment, says co-op lawyer Steven Troup, a partner in Tarter Krinsky & Drogin. That standard is the same if the names of a parent and an adult child are on the lease.

If only one person in the marriage is named, then most leases dictate that the co-op board cannot "unreasonably withhold consent" for the surviving spouse to remain, says Troup. The key to what is "reasonable" is the survivor's financial ability to continue paying the unit's monthly charges.

Human Rights, and Wrongs

If the people in question are unmarried but living as domestic partners — whether gay or straight — Troup says they would probably be able to argue that the same standard should apply, and they should not have to face any more financial scrutiny than a surviving spouse from a marriage. The New York City Human Rights Law provides protection for several groups, including domestic partners, and the city's Human Rights Commission pursued a key case in this vein in 1992: It pursued a Sutton Place co-op for discriminating against Harry Kirkpatrick, who wanted to occupy the apartment he shared with his partner, who had died from AIDS. The case was settled in 1994, after Kirkpatrick's own death, with the co-op agreeinbg to let Kirkpatrick's new partner inherit the unit. The board also agree to amend its leases to explicitly allow transfer to domestic partners.

It does remain appropriate in domestic-partner situations, regardless of orientation, to look into the finances of a partner whose name is not on the lease, says Troup. The same is true if the resident has bequeathed the co-op to a relative. A board, he says, "would be acting irresponsibly if they just allowed it to go to anyone without knowing whether that person was able to meet [his or her] financial obligations."

The timing of this is important, however. "Unless the co-op is in a tremendous financial bind it makes no sense to spend money to kick someone out unless [the board] really [has] to," says lawyer Andrew Berkman, in-house counsel at Milstein Properties. A board has a stronger case for removal if a person fails financially than if the board challenges his or her financial fitness beforehand. "Someone can always muddy the water with a discrimination claim," Berkman says, adding: "You will always have the real value of the apartment. Whether it's held by the bank or a new buyer, the co-op board will get paid any arrears, interest, and late charges."

Intestate Commerce

If an unmarried resident dies " intestate" (i.e., without a will) or if the will is contested, Berkman advises waiting until the matter is resolved in probate court. "If the next of kin … shows up saying, ‘I'm a family member, who is this?' the [domestic partner] is basically a squatter [in the court's view] and can be evicted by a family member who wants to sell the apartment."

Estate lawyer Remo Hammid suggests that boards send a letter to all residents reminding them of the importance of planning for the inevitable. Several lawyers say estate-related issues will probably be on the rise for several reasons, particularly the aging population.

Adapted from Habitat October 2007. For the complete article and more, join our Archive >>