I am a shareholder in a cooperative and a self-employed sole owner corporation (S-Corp). The coop board has refused maintenance payments from my corp. on the grounds that the corporation would incur ownership. True? There is no bylaw about it.

ANSWERS:

The mere fact that a party other than the owner makes a payment does not result in a change to the title or legal ownership.

Sara A. Austin
Austin Law Firm LLC
226 E. Market St.
York, PA 17403
717.846.2246 phone
717.846.2248 fax
saustin@austinlawllc.com

The Corporation is not correct. It is true that acceptance of rent for a period of months from someone other than the tenant of record of a rent-stabilized apartment could be deemed to be acceptance of an assignment of that lease to the payor. However, that does not apply to Proprietary Leases in cooperatives, which are obviously not rent-regulated buildings. Furthermore, your proprietary lease contains a “No waiver” clause, which provides that the cooperative corporation does not waive anyrights as a result of its failure to take action or to enforce any particular clause in the lease against a shareholder. Thus the corporation could accept payments, and subsequently require the payment to come from the shareholder of record in the future.

Finally, you could always enter into an agreement with the Corporation by which the Corporation expressly agrees to accept payments from your S Corp. without waiving any of its rights against the shareholder or being deemed to have acknowledged the S corp. as a shareholder. Or the Corporation could require you to enter into a sublease with the S Corp. and agree to accept payments directly from the subtenant until further notice.

Kenneth Jacobs
Smith, Buss & Jacobs LLP
60 East 42nd Street
46th floor
New York, NY 10165
212-688-2400 X4102

Without reviewing the bylaws and occupancy agreement/proprietary lease of the cooperative, I cannot fully answer this question other than giving a “best guess”. It is possible that the cooperative does not allow corporations to own shares or enter into proprietary leases, but this would be uncommon.

My thinking is that so long at the corporation is a the owner of the shares and occupancy rights, then the cooperative association should accept the payments from the corporation.

David G. Hellmuth
Attorney at Law
Direct dial: (952) 746-2107
dhellmuth@hjlawfirm.com
8050 West 78th Street
Edina, MN 55439
Phn: (952) 941-4005
Fax: (952) 941-2337