Q: I am a licensed real estate salesperson and I represent a purchaser who would like to purchase a co-op apartment in the name of a limited liability company ("LLC"). Do any co-ops allow the purchase of a co-op by a LLC?
A: Yes, , although rare, some co-ops may allow the purchase of a co-op by a LLC.
Historically, co-ops have not permitted the purchase of a co-op apartment by a LLC because of the difficulties in dealing with an entity as opposed to an individual shareholder. Specifically, co-ops have been concerned with: (i) occupancy issues, such as limiting who may live in the apartment and (ii) the co-op’s ability to sue the LLC if the LLC or the occupants of the co-op do not comply with the co-op’s rules or if the LLC fails to make maintenance payments.
In order to avoid the problems articulated above, a co-op will generally require a purchaser that is an LLC to: (i) enter into an Occupancy Agreement that limits the occupancy of the co-op to specific individuals, (ii) provide a Personal Guaranty from an individual who will be personally responsible for all of the LLC’s obligations associated with owning the co-op, including the payment of maintenance fees, and (iii) designate a person that can act as an "agent for service of process" in the event that the co-op sues the LLC (the designated person can receive court documents on behalf of the LLC).
Important Tip: As previously mentioned, most co-ops do not permit a LLC to own a co-op. Accordingly, your purchaser should consult with an attorney who can ascertain whether the co-op will permit an LLC to own a co-op and what documents will be required in connection with such a purchase.
The Legal Line Question by:
Neil B. Garfinkel
REBNY Broker Counsel
Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP