SOME NEW YORK CITY COOPERATIVES ARE ALLOWING LLCs TO PURCHASE
As New York real estate values soar, some New York City co-op boards have begun to allow residents to purchase their units with limited liability corporations (LLCs). In additions, some boards are allowing residents to change their ownership from individual to family trust. Boards are changing their old rules, becoming user-friendlier to accommodate new buyers.
If Coop boards allow the purchase of their unit(s) through LLCs, they are taking steps to ensure that a real person will be held responsible for their cooperative ownership responsibilities. Boards are requiring the buyer using an LLC to execute a “personal guaranty”, an agreement ensuring that only the individuals named in the LLC will occupy the apartment and an agreement restricting transfer of the ownership of the LLC without the board’s approval.
Coop boards are also warming to the idea of their unit share being held by family trusts. Coop unit purchasers are drawn to this method of holding coop unit interests because they realize a significant saving on estate taxes. Coop boards may also benefit by being able to evaluate their beneficiary of the family trust long before the trustees demise. A benefit which may allow boards to resolve future problems with the beneficiaries before they grow.
The idea of allowing LLCs buy cooperatives is still a fairly new practice that is being evaluated by co-op boards around the city.
Source: “Co-ops of the Rich / Famous: Should You Let Limited Liability Corporations Buy?” by Kaysen, Ronda HABITAT 10 Apr. 2012