Ideally, beloved heirlooms tend to stay in the family when applicable, passed down from one generation to be appropriately cherished by the next, ad infinitum.

Unfortunately, many families are less than ideal, and thus inheritance can become more point of contention than birthright. This is as true for condominium and cooperative units as it is precious metals. Occasionally the transfer of property is anything but seamless, roping in various players who would rather not be involved in family affairs outside of their own. But customs – and the law – dictate that they must.

Bloodlines

Instances of conflict upon the passing of a unit owner usually revolve around the inability to ascertain to whom the property is intended, whether it’s because there are too few (i.e. zero) candidates or too many. It's the latter instance that can get most dicey, as prolonged legal battles may ensue. Steve W. Birbach, president and CEO of Vanderbilt Property Management LLC in Glenwood Landing, New York, has endured such a saga.

“A fellow who owned an apartment in one of our buildings passed away, and we didn't hear from his estate for a not-insubstantial deal of time,” he relates. “Eventually his son called, whom we informed that the estate needed to keep making maintenance payments for the apartment. Apparently, there were issues between the son, an ex-wife and a current wife.... complicated family stuff of which I'd not been aware and cannot really elaborate on. But the son had been led to believe that he was to inherit the apartment, though the father, after remarrying, had left the place to someone else, and thus the son was unwilling to make payments on a unit that wasn't his. Something near six months go by, and I tell the board that we should just refer this situation to counsel and let them act in the best interests of the co-op.

“During this time,” Birbach continues, “we keep sending bills and calling the numbers we have for the family, but they don't work or we get no reply, so we start a foreclosure action. And in this particular case, the day before the auction, the estate calls and announces that they're going to pay. I refer them to the lawyer, and, lo and behold, they provide bank checks at auction that covered arrears. This took 18 months from start to finish.”

It should be noted that, in these scenarios – especially in a smaller co-op building, like the establishment in question – much burden is placed on the existing residents to cover a unit that has not been providing its share of the monthly maintenance. Depending on an individual shareholder's financial situation, covering even a small portion of another shareholder's delinquent fees can be an impossible burden.

As to how this inheritance conundrum worked out... it has not, necessarily, kind of. “To this day, the estate still owns the unit, and has not done anything with it, despite my encouraging them to sell,” Birbach says. “It's worth a substantial amount of money, and they're still paying the maintenance. I don't have access to the will, so I don't know who's legally entitled to it; I'm just the managing agent. My job is to get paid, and it doesn't really matter from whom. But there's no mortgage, as the dad owned it forever; it makes no sense not to sell. And I don't think anyone ever even goes there.”

As an addendum, Birbach notes that, in a world wherein the aforementioned family did not show up and pay its arrears, the co-op would have opportunity to bid that value at auction. Had no one else showed up with a higher bid, the co-op itself could have obtained the apartment, turned around and sold it at market value, ensuring that the estate of the deceased walked away from quite the valuable asset.

Legal Proceedings

It's worth briefly delving into how these things should best proceed, lest a board and its management find itself surprised by the hurdles in the transition of New York City real estate to an eager party.

“The biggest issue you'll have is being able to proceed against the estate for arrears,” says Marc H. Schneider, Esq., managing partner with Schneider Buchel LLP, which has offices in New York City and Garden City. “But if you're getting your arrears and people are fighting over who's going to be able to sell the apartment, then the issue you could have is that most proprietary leases provide a provision that says the managing agent or board can't unreasonably withhold consent to someone who is financially responsible.

“Recently, there was a debate about whether, should an heir's financials be deemed adequate, there was nothing more a board can or needs do to determine their legitimacy as a shareholder. A case was decided that established a managing agent can still reject the heir if there was something otherwise egregious, like a felony.”

The specific language in the case law is as follows: “If the Lessee shall die, consent shall not be unreasonably withheld to an assignment of the lease and share to a financially responsible member of the Lessee's family [other than the Lessee's spouse as to whom no consent is required].” Presumably, it's in that 'unreasonably' wherein a managing agent has wiggle room to address an 'egregious' reason as to why the heir is problematic.

“If it weren't an inheritance, and a person comes to an interview and declares they're not going to follow the house rule on carpeting, then the board can reject them, as they've demonstrated that they're already not going to follow the rules,” Schneider explains. “But the aforementioned provision changes the game, slightly, so to speak. It limits the board's ability to reject somewhat more than in a normal setting.”

Of course, should one work extremely hard to maintain the perfect American family, then nothing like this will ever be an issue.

Mike Odenthal is a staff writer at The Cooperator.