Cooperative condominiums are a major part of the city’s housing market, accounting for a significant portion of the city’s real estate. Unlike condos, where owners own their units outright as property, shareholders of co-ops own shares in the corporation that owns and operates the building. In exchange for their ownership share, they have the right to occupy their individual apartments and use the common areas within the building. While there are many benefits to owning a co-op, buyers need to be prepared for the unique rules that govern these communities. One of those rules is the proprietary lease, which outlines the relationship between the shareholder and the corporation.
A proprietary lease is a legal document that outlines the rights of the shareholder and the corporation in relation to each other and their apartment unit. Generally, this agreement lists rules for renovating, subletting and other aspects of the residence. It also contains detailed information on the role of the corporation, including the corporation’s responsibility for items that are not the shareholder’s property (such as windows and elevators).
In addition to listing rules pertaining to renovations, the proprietary lease explains the corporation’s function in providing a structure in good condition. This includes collecting monthly maintenance fees, paying bills, contracting for repairs and services, ensuring compliance with local, state and federal laws and setting policy. Ultimately, the proprietary lease attempts to balance the interests of the corporation and the shareholders.
It may also include information on the responsibilities of the shareholder, such as maintaining their unit and complying with rules regarding pets, guests, smoking, and other activities. The proprietary lease may also explain the procedure for levying and collecting assessments for large expenses, such as the replacement of major appliances or structural work to an entire building.
For those wishing to make changes or improvements to their residence, the proprietary lease will outline specific guidelines for gaining permission from the corporation for such things as painting walls or rerouting pipes. This is because the corporation must protect the interest of other shareholders from actions that could compromise the health and welfare of occupants or the legal status of the building.
Another key aspect of the proprietary lease is the process for changing or extending the expiration date. Updating the proprietary lease can be as simple as an annual meeting or special shareholder vote. However, extending the expiration date can require a two-thirds majority of all shareholders’ votes since it would be changing one of the core corporate documents.
A knowledgeable New York cooperative condominium attorney can help a prospective or current shareholder review the proprietary lease and ensure they understand its terms and their relationship to the corporation. This can help buyers make an informed decision about purchasing a co-op and can prevent complications down the road.
When purchasing a New York City apartment or condo, you may have heard about an important legal document called a proprietary lease. This document dictates the specifics of a buyer’s relationship with a cooperative corporation that owns and operates a building where they live. It will contain rules on renovations, subletting, maintenance, and other issues that would not be covered in a standard apartment lease or condominium association rulebook.
The proprietary lease will typically include information such as the apartment number and floor level, as well as a description of the unit interior. It will also contain the share price, which represents a proportionate share of ownership in the building and the corporation. Shareholders are responsible for paying monthly maintenance fees to cover the operating expenses of the corporation, as well as the property taxes and mortgage for any underlying debt on the building. They will also be responsible for paying any special assessments that the corporation levies on a discretionary basis.
It is not uncommon for a proprietary lease to include provisions governing the right of a shareholder to make alterations to their unit. These changes could be as minor as installing a pedestal sink, but they can also involve structural work such as rerouting plumbing or modifying electrical wiring. If a shareholder wants to do something significant within their unit, they will have to go through the process of getting a building permit and seeking approval from the board of directors. The purpose of this is to ensure that any work does not interfere with the health and safety of occupants, the structure of the building, or its legal status.
A typical proprietary lease will also list the rights and responsibilities of shareholders with respect to other aspects of the building. For example, if a tenant-shareholder’s neighbor hosts loud parties late into the night, it is the co-op’s responsibility to address this issue and restore quiet enjoyment for all shareholders. This is a significant difference from a single-family home, where the owner of the property is generally responsible for maintaining their own property.
Whether you are considering a coop purchase or need to review your proprietary lease, it is important to get the assistance of an experienced New York real estate attorney. They will be able to explain the legal concepts involved and assist you in navigating the complex rules and procedures of the co-op.
For instance, if you want to transfer your shares or proprietary lease to a trust, you will likely need the bank that holds your mortgage’s permission before doing so. In most cases, the lender will need to have a copy of the proprietary lease and a written statement from management stating that you are an approved shareholder/tenant.
Proprietary leases are essential for anyone living in a cooperative building, and you should always keep a copy of yours. Your lawyer will also be able to help you understand the various terms and conditions of your proprietary lease during the due diligence process and during negotiations with the seller.
Proprietary leases are the governing documents of your co-op. They highlight the cooperative’s organization and management. They also outline the rights and obligations of the shareholder. These documents are typically updated by the Board when the lease is amended. They typically contain house rules, voting rules, and indemnification provisions. However, the most important part of the proprietary lease is the tenancy section. The tenancy section dictates the terms of your apartment. Generally, this section contains the maximum permitted occupancy and maintenance responsibilities. It will also spell out the procedures for changing your tenancy agreement. If your tenancy violates the terms of the tenancy section, you will be in violation of your proprietary lease.
A tenancy violation can be serious and could cause you to lose your right to live in your condo. The violations can include a failure to comply with house rules or breaching the confidentiality provision. A violation of the tenancy section can even lead to eviction if the board finds that you are a disruptive tenant or a nuisance to the building.
In this case, Blumenfeld alleges that the Board violated Stable’s tenancy by refusing to sign applications to the Department of Buildings (DOB) and the Landmark Preservation Commission on behalf of a certain LLC. The DOB and LPC applications were necessary for Stable to make structural repairs and alterations in the Apartment’s exclusive areas, as required by the tenancy section of the proprietary lease. The tenancy section of the lease requires Stable to make all such repairs “to ensure the structural integrity of the Apartment and its enclosing structure, except for any deterioration caused or accelerated by the use thereof.” Peterson affidavit in support of the amended 2017 complaint, P 3.
The second alleged violation of plaintiffs’ proprietary lease involves the Board’s refusal to approve the LLC’s plans to install an outdoor terrace and pool in front of the apartment. The tenancy section of the lease states that tenants must have Stable’s written consent to construct exterior residential structures.
Finally, the third cause of action involves the Board’s refusal to approve a modification to the tenancy section of the proprietary lease that would allow an additional pet, as well as the tenancy section’s prohibition on the occupancy of pets and service animals by minors.
This cause of action sounds in violation of New York law and should be dismissed. Moreover, the fact that this cause of action is against the individual Board members and not against Stable is significant in that it reveals that these defendants were not parties to the proprietary lease and thus cannot be held responsible for a violation of its terms. This Court will dismiss this cause of action on those grounds.
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