Sep
29

Purchasing a Coop in the Name of a Trust

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 Q:  I represent a purchaser who would like to purchase a cooperative apartment in the name of a trust.  The cooperative board will not allow this.  Why is a cooperative board reluctant to allow a shareholder to own a cooperative apartment in the name of a trust?

A:  Some cooperative boards do not allow their shareholders to own a cooperative apartment in the name of a trust.  This is due to the difficulties that may arise in dealing with a trust as opposed to dealing with an individual.  For instance, a cooperative’s proprietary lease generally places limitations on who can live in an apartment.  When the owner is a trust, a cooperative board will have a difficult time regulating who can live in the apartment since the entity itself cannot physically occupy the apartment.  Furthermore, if maintenance payments are not being made or the cooperative board’s rules are not being followed, it is easier to sue an individual owner rather than a trust.

Notwithstanding the foregoing, many cooperative boards recognize that trusts are an important estate planning vehicle.  As such, some cooperative boards may allow a cooperative apartment to be owned by a trust if the trustee or the occupant: (i) executes an Occupancy Agreement defining who has permission to live in the cooperative apartment; (ii) signs a personal guarantee assuring compliance with the cooperative board’s rules and the payment of maintenance; and (iii) designates an individual for service of process of legal papers on behalf of the trust.

You should always consult with the managing agent or the cooperative board to determine if a cooperative apartment is permitted to be owned by a trust.

Information provided by Neil B. Garfinkel, REBNY Residential Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP

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