Can a Co-op Board Deny a Transfer of a Unit to Three Children?

Q: The owner of a small co-op apartment on the Upper West Side would like to leave the apartment to his three children in his will — then let them work out what to do with it. Is it a bad idea to bequeath a co-op unit to three children?

A: It is certainly possible for a shareholder to leave an apartment to his children in his will, but they will still need the co-op board’s approval to own it, and that approval is by no means guaranteed, replies the Ask Real Estate column in The New York Times. Rules can vary based on a building’s proprietary lease, which governs the relationship between the co-op and its shareholders.

In the event of a shareholder’s death, most proprietary leases have clauses that indicate how to handle the property transfer to a family member. Transfers to a spouse often do not require approval from the board, says William Geller, counsel at the law firm Braverman Greenspun, who has also served as president of a co-op board. For others, the proprietary lease may specify that the board won’t "unreasonably" deny a transfer to a financially responsible family member.

Geller adds: “The general rule is that the co-op board has the right to approve or deny a sale for any reason — good, bad or otherwise — except for a legally prohibited reason, such as discrimination on the basis of race, nationality or other protected class.”

Given a co-op board's extensive power, in other words, approval of a transfer to three children is by no means a given. Therefore, naming all of your children as co-owners of the unit might not be the wisest idea. The board may hesitate to approve three new owners because it would mean three different people with occupancy rights, says Robert Steele, a partner and chair of the trust and estate department at the law firm Schwartz Sladkus Reich Greenberg Atlas.

“While it’s theoretically possible," Steele notes, "I think it would be very unusual for a co-op board to allow three separate owners, all of whom have occupancy rights to bring in their children and whatever.”

If they don’t get board approval, the three children could sell the apartment and split the equity. However, a shareholder might want spare his children a potential conflict with the co-op board — and any potential bad blood among themselves — by selling the apartment now and disbursing the profits himself. Problem solved.