Dean Roberts, Member, Norris McLaughlin in Legal/Financial
Mitchell-Lama apartments present an affordable housing option for New York City residents. They are a form of subsidized housing where shareholders reap the benefits of lower maintenance because they don't pay full real estate taxes. That conversely comes with certain burdens, including annual income affidavits and surcharges, being subject to rules and regulations, and not being able to resell your apartment for a profit. However, if certain rules are met, the apartment can be passed down from family member to family member. For these reasons, finding a Mitchell-Lama apartment is very competitive and requires a good degree of patience.
First step. Prospective Mitchell-Lama residents must register for a unit through the New York City Department of Housing Preservation and Development’s (HPD) housing direct website. While some Mitchell-Lama co-ops maintain open waiting lists, others conduct occasional lotteries, contributing to long wait times that can extend to more than a decade. Boards do not control who comes in and out of a Mitchell Lama co-op; instead applications are accepted off the waitlist.
Transferring an apartment. Succession is the term used when a Mitchell-Lama apartment is transferred from the original shareholder to a different household member. New York State Homes and Community Renewal (HCR) and HPD have similar procedures. Succession rights are available to family members, either in the biological sense of that word or in the more nuanced non-traditional definition. You may apply to take over ownership and occupancy of an apartment if you appear on two years' worth of annual income affidavits and have lived in the apartment with the shareholder before their departure, either due to death or relocation. Successors must be adults of at least 18 years of age.
Board responsibilities. Boards have a fiduciary duty to ensure a successful succession process. That doesn't mean they need to be directly involved in the succession process, but the managing agent must know the procedures and policies and the co-op must follow the government guidelines. A succession transfer is not going to change the economic structure or bring a benefit to the co-op. However, a Mitchell-Lama apartment is one of the last true treasures in New York, so people are highly incentivized to create succession claims and to litigate succession claims. Oftentimes if a co-op denies a succession claim, the matter will end up in litigation. It’s sensible for boards, in partnership with the managing agent, to have clear guidelines and a consistent policy on succession.
Protecting apartment resources. Under both HCR and HPD rules and regulations, you can apply occupancy standards to succession. In practical terms, this means avoiding the misallocation of apartment resources where a single individual, through succession, is living in a three-bedroom apartment. The board can vote or pass a resolution to have the occupancy standards apply in succession. HPD rules allow for this. However, it must be uniformly applied. Somebody who's favored can't stay in the three bedroom absent very big hardship explanations.
Succession denials. A succession claim may be denied on the basis of occupancy duration, familial relationship or potential misuse of the process. Caregivers and non-traditional family members attempting succession will be unsuccessful. The economic incentives for succession are clear, so in rare circumstances, people are willing to create false succession claims. There have been instances in New York where managers or individuals created false succession claims in order to, in essence, sell the apartment.