Skip to main content
Fulltext search
FILTER RESULTS BY:
RECOMMENDED IN RENT
Moving to NYC after college? Here's how to find a rental apartment
RECOMMENDED IN BUY
How buying real estate in NYC is unlike anywhere else
RECOMMENDED IN SELL
A guide to using a no-fee renovation loan from a NYC real estate firm
RECOMMENDED IN IMPROVE
How to make your NYC renovation more pet-friendly
BEST REAL ESTATE WEBSITE!
National Association of Real Estate Editors
BEST REAL ESTATE WEBSITE! National Association of Real Estate Editors
Brick Underground
Social Links
follow:
  • Facebook
  • Twitter
  • Instagram
  • Flipboard
  • search
Brick Underground
☰ Brick Underground
Brick Underground
Brick Underground
☰
Brick Underground
  • Buy
    • Buy
    • The Market
    • Investing
    • New Construction + Condos
    • Affordable Housing
    • Co-ops
    • Negotiating + Financing
    • How to Buy in NYC Guide
    New condos in Manhattan
    Investing
    Rise of all-cash deals in NYC reshapes the real estate market
    empty nesters in modern kitchen
    Rent
    Empty nester checklist: What to consider if you are buying or renting in NYC
    co-op board reference letters NYC
    Co-ops
    Here are 8 real co-op board reference letters from successful buyers
  • Rent
    • Rent
    • Affordable Housing
    • Roommates + Landlords
    • The Market
    • The Search
    • How to Rent in NYC Guide
    Rachel's one-bedroom co-op apartment is newly renovated.
    Roommates + Landlords
    Why I moved to NYC from Long Island: After living with mean roommates, I wanted to own a place of my own
    Apartment buildings on MacDougal Street in Greenwich Village
    Affordable Housing
    Cuomo’s attack on Mamdani’s $2,300 apartment brings rent stabilization into the spotlight
    Woman walking down street in Jackson Heights
    Roommates + Landlords
    Ask Altagracia: Can my landlord refuse a lease assignment if I need to break my lease?
    Sponsored By Outerbridge Law P.C.
  • Sell
    • Sell
    • Staging + Open Houses
    • Negotiations + Closings
    • Getting Ready
    • How to Sell in NYC Guide
    Aerial view of downtown Brooklyn
    Sell
    Median sales price in Brooklyn climbs to $995,000 in the second quarter
    Downtown New York City
    Sell
    Manhattan deals rose to highest level in nearly two years, defying national trends
    Modern residential buildings in Chelsea, Manhattan
    Negotiations + Closings
    What is a post-closing possession agreement and what are the risks for buyers and sellers?
  • Live
    • Live
    • Neighbors
    • Kids + Pets
    • Neighborhood Intel
    • Products + Test-drives
    • Troubleshooting
    FlatRate moving brick underground
    Live
    How to troubleshoot your move in advance
    Sponsored By flatrate
    Woman on the phone to a plumber about a leaking sink
    Small Projects + DIY
    Here's what I learned to get our absentee landlord to fix things fast
    Big Apple Moving stackable eco-friendly bins
    Products + Test-drives
    Do I have to use cardboard boxes when moving in NYC? Are there any green alternatives?
    Sponsored By Big Apple Moving
  • Improve
    • Improve
    • Small Spaces
    • Small Projects + DIY
    • Renovations
    • Design + Architecture
    • Products + Services
    • How to Renovate in NYC Guide
    insurance adjuster inspecting mold
    Products + Services
    How to tell if your apartment has mold—and how to get rid of it
    Woman on the phone to a plumber about a leaking sink
    Small Projects + DIY
    Here's what I learned to get our absentee landlord to fix things fast
    mini splits apartments new york city
    Products + Services
    Yes, you can install central AC in your co-op or condo unit. Here's how
  • Boards & Buildings
    • Boards & Buildings
    • Boards
    • Finance
    • Insurance
    • Legal
    • Property Management
    • Structure & Systems
    • Sustainability
    Burned and Boarded Up Windows
    When should your board hire a public adjuster?
    Manhattan GM
    What should we consider when renewing insurance for our building?
    Facade of NYC buildings
    How much is insurance on a NYC co-op or condo building?
  • Advertise
    • Advertise with us
    • Sponsored Content
    • Experts
    FlatRate moving brick underground
    Live
    How to troubleshoot your move in advance
    Sponsored By flatrate
    Big Apple Moving stackable eco-friendly bins
    Products + Test-drives
    Do I have to use cardboard boxes when moving in NYC? Are there any green alternatives?
    Sponsored By Big Apple Moving
    Woman walking down street in Jackson Heights
    Roommates + Landlords
    Ask Altagracia: Can my landlord refuse a lease assignment if I need to break my lease?
    Sponsored By Outerbridge Law P.C.
  • Brick Report
  • About Us
  • About Us
Email Address
Fulltext search
FILTER RESULTS BY:
New Main menu
  • Buy
    • Buy
    • The Market
    • Investing
    • New Construction + Condos
    • Affordable Housing
    • Co-ops
    • Negotiating + Financing
    • How to Buy in NYC Guide
  • Rent
    • Rent
    • Affordable Housing
    • Roommates + Landlords
    • The Market
    • The Search
    • How to Rent in NYC Guide
  • Sell
    • Sell
    • Staging + Open Houses
    • Negotiations + Closings
    • Getting Ready
    • How to Sell in NYC Guide
  • Live
    • Live
    • Neighbors
    • Kids + Pets
    • Neighborhood Intel
    • Products + Test-drives
    • Troubleshooting
  • Improve
    • Improve
    • Small Spaces
    • Small Projects + DIY
    • Renovations
    • Design + Architecture
    • Products + Services
    • How to Renovate in NYC Guide
  • Boards & Buildings
    • Boards & Buildings
    • Boards
    • Finance
    • Insurance
    • Legal
    • Property Management
    • Structure & Systems
    • Sustainability
  • Advertise
    • Advertise with us
    • Sponsored Content
    • Experts
  • Brick Report
  • About Us
    • About Us
    • Advertise
  • About Us
SUBSCRIBE TO OUR NEWSLETTER →
Social Links Footer
  • Facebook
  • Twitter
  • Instagram
  • Search
Ask a Co-op & Condo Lawyer [ SPONSORED ]

A co-op buyer wants to use a trust. Should our board approve this?

By Wagner, Berkow, and Brandt  | December 1, 2021 - 2:45PM
image

An inducement or occupancy agreement will address the concerns a board may have about a purchaser buying in a trust or LLC.

Emily Myers for Brick Underground 

SHARE:
Share to Facebook
Share to Twitter
Print
More...

Our co-op board was asked to approve a buyer using a trust. Should we allow this? What sort of protections do we need?

“When a co-op purchaser wants to buy using a trust or limited liability company—known as a LLC—boards are typically concerned about long-term ownership of the apartment, who will live there, and whether monthly fees will be paid,” says Steven Wagner, a real estate attorney at the Manhattan law firm Wagner, Berkow & Brandt who represents co-op and condo boards and owners.

Trusts and LLCs are often used for estate planning and tax purposes, and there are steps that can be taken to protect a co-op against some of the common issues that arise, namely the transfer of the apartment without board approval or the liability of the shareholder if maintenance or other fees are not paid.  

With the help of an attorney, a board can draw up an occupancy agreement, also known as an inducement agreement. 

“This agreement includes restrictions on occupancy and transfers, requires guarantees and indemnities, and states that if there are violations of the proprietary lease or house rules, the trust does not protect the occupant from eviction,” Wagner says.

Prohibitions against purchases by a trust can be waived

In older co-ops, the governing documents may prohibit a purchase by an entity. This was for tax purposes but Wagner says the law has changed. 

“Even if this is the case, the prohibitions can be waived in writing by entering into an inducement agreement with the tenant shareholder,” he says. 

Depending on the complexity of the trust, there may also be a need for further reassurances for the board. This may include having a guarantee that payments and other obligations under the governing documents, like assessments, will be made.  

There may also be a need for an opinion of counsel from the legal team that set up the trust or is assisting with the transfer of the apartment. This would typically be required if the trust was established in a different jurisdiction. 

“There may be a question of which law applies—New York law or the laws of another state where the trust was set up,” Wagner says. An opinion of counsel can be submitted by the trust’s attorneys, making it more difficult for the arrangements for the trust to be contested at a later date.

“The legal fees for these documents can range between $3,500 to $5,000 or more and the co-op board can stipulate that these costs will be met by the purchaser,” Wagner says. 

Provisions of an inducement agreement

The inducement agreement makes clear the trust is the lessee and not the individuals residing in the apartment or the beneficiaries of the trust. It also states the occupancy is limited to those approved by the board. 

Wagner says he will typically add language to the agreement stating that the trust is not an individual but an entity and as such has no immediate family members. 

“In the proprietary lease there’s typically a provision not to unreasonably refuse the transfer of co-op shares to a spouse or family member. In an inducement agreement, we make it clear that a trust or LLC has no family members,” he says.

Another aspect of the agreement is to indemnify the co-op in the event there is any challenge or litigation regarding the trust or the LLC.  

“The agreement also makes clear that each party—the grantor, the trustee, beneficiary, and successor beneficiary—will abide by the various governing documents including the house rules, the proprietary lease, the certificate of occupancy, and the offering plan, to the extent consistent with the inducement agreements,” Wagner says.  

Those seeking to put the apartment into a trust must also agree to appoint someone to receive lawsuits. 

“This gives the board additional reassurances,” Wagner says. In addition, there’s often a non-waiver provision, so that if the board fails to enforce or carry out any provisions of the agreement, they will be able to enforce the provisions at a later date. 

Some trusts are irrevocable and cannot be changed but, where possible, Wagner negotiates an amendment to the trust to provide that the sale and occupancy of the apartment is subject to the occupancy agreement and that any violation of the occupancy agreement will be deemed a violation of the proprietary lease.  

“What the agreement seeks to do is prevent someone putting an apartment into a trust or LLC and then changing who can occupy the apartment or who owns the apartment by amending the trust agreement or operating agreement of the LLC or selling the interests in the LLC,” Wagner says. 

“Very often these LLC’s or trusts are single purpose entities that have no other assets, so we make sure we have guarantees from people who have assets,” he says. 

In this way, the buyer is able to take advantage of the trust or LLC for tax or estate planning purposes and the co-op gets the protections it needs with regard to who lives there and who is liable for unpaid maintenance or other liabilities.

New York City real estate attorney Steven Wagner is a founding partner of Wagner, Berkow, & Brandt, with more than 30 years of experience representing co-ops, condos, as well as individual owners and shareholders. To submit a question for this column, click here. To arrange a free 15-minute telephone consultation, send Steve an email or call 646-780-7272. 

You Might Also Like

image
Renovation Our building wants to create storage spaces to sell or rent to residents—what do we need to know?
image
Negotiations + Closings Who should we hire to help sell our NYC building's air rights?
image
Troubleshooting A shareholder in our co-op hasn’t paid maintenance in over a year. What can we do?
Headshot of Emily Myers

Emily Myers

Senior Writer/Podcast Producer

Emily Myers is a real estate writer and podcast host. As the former host of the Brick Underground podcast, she earned four silver awards from the National Association of Real Estate Editors. Emily studied journalism at the University of the Arts, London, earned an MA Honors degree in English Literature from the University of Edinburgh and lived for a decade in California.

SEE MORE BY Emily Myers »
Brick Underground articles occasionally include the expertise of, or information about, advertising partners when relevant to the story. We will never promote an advertiser's product without making the relationship clear to our readers.

topics:

Ask a Co-op & Condo Lawyer boards co-op board Co-ops estates lawyers LLC taxes
SHARE
TWEET
BRICK’S PICKS
empty nesters in modern kitchen
Empty nester checklist: What to consider if you are buying or renting in NYC
NYC apartment building with AC units
My neighbor's dripping AC is driving me crazy. What can I do?
Historic brick facades of NYC apartment buildings
Getting overcharged by a landlord? Here’s how the Tenant Protection Unit helps rent-stabilized tenants
Apartment buildings in Soho
New Rent Guidelines Board report justifies a rent freeze, tenant advocates claim
Brooklyn apartment buildings
Understanding net effective rent: Here's how to calculate your real monthly rent
image
How much should you renovate your NYC apartment or house before selling?
Follow Brick on Instagram
@brickunderground | #brickunderground
Brick UndergroundBRICK UNDERGROUNDREAL LIFE. REAL ESTATE. REAL NEW YORK.
Social Links Footer
  • Facebook
  • Twitter
  • Instagram
  • Search
Main menu footer
  • Buy
    • The Market
    • Investing
    • New Construction + Condos
    • Affordable Housing
    • Co-ops
    • Negotiating + Financing
    • How to Buy in NYC Guide
  • Rent
    • Affordable Housing
    • Roommates + Landlords
    • The Market
    • The Search
    • How to Rent in NYC Guide
  • Sell
    • Staging + Open Houses
    • Negotiations + Closings
    • Getting Ready
    • How to Sell in NYC Guide
  • Live
    • Neighbors
    • Kids + Pets
    • Neighborhood Intel
    • Products + Test-drives
    • Troubleshooting
  • Improve
    • Small Spaces
    • Small Projects + DIY
    • Renovations
    • Design + Architecture
    • Products + Services
    • How to Renovate in NYC Guide

Get more news you can actually use...

Email Address

Delivered to your inbox weekly - for free.

*By signing up you agree to receive occasional emails on behalf of our sponsors

Footer Menu
  • About Us
  • Advertise

Copyright 2009-2024 by BND Ventures Inc | Privacy Policy | Terms of Service | Ad Choices | Login