Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.
A proprietary lease for a coop apartment is a contract between an owner (aka shareholder) and a cooperative corporation. Most of the units in New York City are coops. Indeed, the proprietary lease is one of the documents within the co-op’s offering plan. Condos do not have a Proprietary Lease, so individuals buying an apartment & condo owners have never heard of this. This legal concept covers the specifics of the relationship between shareholders and the cooperative. Therefore, it outlines the rules for renovating, subletting, maintenance, repairs, and more. In other words, this contract governs the relationship between the various parties. In other words, this agreement regulates the terms of the shareholder’s residency in the building. Also, this contract explicitly designates their apartment in the building.
This owner does not own his apartment but only owns the co-op. Legally, the unit is not considered real property. This entity or “co-op” owns the building (the rest estate itself). Under NYC’s rent regulation laws, the shareholder is not considered a statutory tenant.
Instead, the contract governs the relationship between the shareholder and the co-op. The proprietary lease also governs the business law of corporations in New York State. Lastly, this law operates for the benefit of all shareholders.
This document reminds each shareholder that the co-op’s responsibility is to maintain the building in good condition. This responsibility includes common areas (sidewalks, gym, hallways, stairways, elevators, etc.) It also goes over what utilities the HOA have, generally water & gas.
Yes. Typically, the board extends the lease term when it reaches 25 or 30 years in the future. The goal is to keep the maturity between 30 and 50 years.
This is because a proprietary lease that expires under 30 years may cause problems with potential lenders.
Sadly no. Tax authorities could interpret such a long lease period as a transfer of ownership from the co-op to the owner. This interpretation becomes transactional with potential capital gains, which could trigger the payment of NYS and NYC transfer taxes.
For this reason, co-op boards will update a proprietary lease maturity between 30 and 50 years.Contact your real estate agent at NestApple, the only broker offering a 2% broker fee rebate in New York.