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Purchasing a Cooperative Unit in a Trust

Purchasing a cooperative (“Co-op”) unit in the name of a Trust has become more and more frequent in recent years. For a long time, many co-ops would not approve trust ownership. However, several co-ops have come to an understanding that if the proper protections are put in place, a trust does not have to pose a threat or burden to the co-op corporation and can be an effective means to estate planning or privacy protection for its shareholders.

To start, an interested purchaser may want to review the proprietary lease and/ or by-laws for language pertaining to the permittance of trust ownership as some co-ops still do not allow it. The co-op’s attorney or management co. could also advise to this. If allowable, each co-op will likely have certain fees to be paid and steps to be taken to effectuate the trust transfer which will include, but not limited to, a legal review of the trust, the submission of an attorney opinion letter and executing a Trust Occupancy Agreement/Guaranty.

The Attorney Opinion Letter will likely come from the trust and estates attorney who initially prepared the trust. The letter, accompanied by a true copy of the trust for review, will confirm the name and date of the trust as well as the date of any and all amendments made thereto. Additionally, the letter will confirm the state in which the trust was validly created in accordance with its laws. Lastly, the opinion letter will include any necessary information requested by the individual co-op.

The Trust Occupancy Agreement will be drafted by the co-op attorney and is specific to each transaction. The Agreement is signed by the co-op, trust, guarantor, and unit occupants to, among other things, limit the occupancy of the unit to specific individuals specified in the agreement and provide detailed protections and indemnities to the co-op including any personal guaranty if required.

Lastly, the shareholder or purchaser wishing to transfer or purchase shares in a trust will be responsible for any legal fees in connection with the review of the trust and preparation of the accompanying legal agreements.

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