Surrogate Directs Sale of Cooperative Apartment After Board Refuses to Permit Transfer To Trust A Ganfer & Shore Client Advisory for August 2008 Ganfer & Shore, LLP (New York, NY)

Stock in a cooperative apartment is personal property which the owner may bequeath to anyone of his or her choosing under the owners will.However, most proprietary leases require board approval before a new resident (other than some immediate family members) may occupy the unit.What happens when an owner bequeaths a cooperative apartment to someone that the board is not willing to approve?This question was addressed by the Surrogates Court in Matter of Carniol, 2008 WL 2746853, 2008 N.Y. Slip Op. 28253 (Surr. Ct. Nassau Co. June 26, 2008).
In this case, the owner of a cooperative apartment died leaving a will which bequeathed the apartment to a trust, for use by my granddaughter . . . if and for as long as she wishes to reside there.Carrying costs on the apartment were to be borne by the granddaughter, and the trustee was authorized to sell the apartment only with the granddaughters consent.
When the trustee contacted the Cooperative to discuss the procedures for obtaining board approval, the boards counsel advised him that the Cooperative would not approve a transfer to the trust.Additionally, the trustee concluded that based on the granddaughters financial circumstancesand background, the board was unlikely ever to approve her as a resident, even apart from the policy concerning ownership by trusts.Meanwhile, the granddaughter was refusing to pay the expenses of maintaining the apartment, but had refused to consent to its sale.As a result, the estate was being forced to pay maintenance on an unoccupied apartment that was providing no benefit to anyone.
Under these circumstances, the Surrogate invoked the doctrine of equitable deviation from the literal terms of the will, and authorized the trustee to sell the apartment and to use the proceeds to acquire a new residence for the granddaughter.From the point of view of cooperative boards, the case recognizes the boards right to enforce proprietary lease restrictions on who may own and occupy units, even where an owner bequeaths the stock ownership and the proprietary lease by will.