Our Building's Proprietary Lease Is Expiring Soon — Why Is This a Problem?

Aug. 4, 2015 — We just learned that the building's proprietary lease expires in three years. Our lawyer says that is a problem. How so?

If the proprietary lease expires in less than 30 years, it should be amended to extend the term so that owners can obtain financing. If a proprietary lease's term is shorter than 30 years, banks may not provide a mortgage because their collateral is not protected. To increase the expiration of the lease, the bylaws require that the proprietary lease be amended. The percentage of shares required to amend a lease can be found in the proprietary lease.

It is imperative that a managing agent and/or the co-op attorney check all lease expirations so that a cooperative meets the bank requirements and apartment sales can go forward. A "Notice of Approval of Lease Amendment" must be sent out to all shareholders to obtain written consent to increase the lease by a minimum of 30 years.

With a co-op's lease expiring in three years, buyers — unless they pay cash — will not be able to finance their purchase. The proposed amendment should be drafted by the co-op attorney setting forth the purpose and importance of voting for the amendment.

Ellen Kornfeld is vice president of The Lovett Company