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.
By definition, a proprietary lease for a coop apartment is the name of the contract between an owner (aka shareholder) and a cooperative corporation or co-op. Most of the units in New York City are coops. Indeed, the proprietary lease is one of the documents you will find within the co-op’s offering plan. In fact, condos do not have a Proprietary Lease this is why individuals buying a condo & condo owners have never heard of this. This legal concept covers the specifics of the relationship between shareholders and the cooperative itself. It outlines the rules for renovating, subletting, maintenance, repairs, and more. 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. This contract designates their apartment in the building explicitly.
The proprietary lease 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 include, generally water & gas.
Yes. Typically, when the lease’s expiration date reaches 25 or 30 years in the future, the co-op extends the term for many more years. That’s because a proprietary lease that expires in under 30 years may cause problems with potential lenders. As a result, the co-op board extends the lease to keep the maturity between 30 and 50 years.
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. This could trigger the payment of NYS and NYC transfer taxes. For this reason, co-op boards will keep a proprietary lease maturity updated with a maturity between 30 and 50 years.