Tenancy by the Entirety New Law Provides Protection for Married Co-op Owners

Tenancy by the Entirety

Most co-op owners have never given much thought to the manner in which they took title of their apartments. But by overlooking this important aspect of such a significant purchase, some shareholders may have put themselves at considerable financial risk. The method by which a married couple takes title to their real estate holdings can have major reper-cussions in the event of the death, bankruptcy or default of a spouse, or in the case of a divorce.

This past spring the 218th session of the New York State Legislature passed a little noticed amendment to the New York Estate Power and Trust Law which has a significant impact on cooperative apartment ownership in the State of New York. This amendment permits married couples to own their cooperative apartments as tenants by the entirety, a legal way of taking title that has been extended to include co-ops for the first time as of January 1, 1996.

Married couples who currently own co-ops may wish to consult their lawyers about converting their form of ownership to this new alternative to better suit their individual needs. And those married couples considering buying a co-op should familiarize themselves with the different methods of taking title so that they can choose the one that will best protect their assets.

Tenancy By the Entirety

Tenancy by the entirety was first codified in New York in 1896. However, since a cooperative apartment purchase is technically a securities transaction and not a real estate purchase, this beneficial form of ownership has not been available to married couples purchasing cooperatives until this new legislation went into effect on the first of this year. At last, husbands and wives living in cooperative apartments have been put on an equal plane with married couples owning private homes, condominiums or land.

Under this form of ownership married couples who take title to a cooperative apartment and either specify title to be by the entirety, or fail to make any selection as to title, will be deemed to own their apartment by the entirety. Under this form of ownership, the two spouses are viewed as a single person, and it is in this joint persona that title is vested. Each spouse, therefore, owns an undivided 100 percent interest that cannot be sold or diminished by the other. Upon the death of one spouse, the survivor is fully titled with the shares and Proprietary Lease and is deemed by the law to have always been the sole owner.

So long as the couple remains married, the survivorship right of each spouse cannot be terminated. Accordingly, while a cred-itor of one tenant by the entirety can obtain a lien on that spouse's interest in the apartment, the lien will only survive if that particular spouse is the surviving spouse. Should the debtor die prior to his or her spouse, the creditor's interest in the apartment is extinguished and the surviving spouse takes the apartment free of all liens. Similarly, New York cases have held that a receiver in bankruptcy cannot reach or sever ownership when it is by the entirety.

The ability to prevent creditors of one spouse from reaching, attaching and possibly selling the joint marital property of tenants by the entirety is one of the unique and important benefits of this type of ownership. Accordingly, if you are a married owner of a cooperative apartm ffb ent who may be at financial risk in the business world or otherwise, you may wish to select ownership of your cooperative apartment as tenants by the entirety, so as to protect the marital asset from your creditors for the benefit of your surviving spouse.

Also important in this type of ownership is the fact that neither spouse can unilaterally sever or sell his portion of the property without the consent of the other. It should be noted, however, that divorce will automatically convert this type of ownership into a joint tenancy.

Joint Tenancy

Prior to January 1, 1996, those couples (married or not) who wanted to provide their partner with survivorship rights to an apartment would have to specify to the co-op's transfer agent (managing agent) that title was to be taken as joint tenants. This type of ownership is somewhat akin to tenants by the entirety in that each of the co-owners will have the right of survivorshipthat is, the absolute right to receive title to the entire prop-erty upon the death of the other owner.

Each joint tenant owns an undivi-ded interest in the apart-ment with the other co-tenant. However, under joint tenancy, such an interest can be pledged or transferred by either joint tenant without the authority or consent of the other. Moreover, the interest of each joint tenant is subject to attachment by creditors and by the Bankruptcy Court. If such attachment takes place, the joint tenancy can be terminated and the apartment either divided (unlikely) or sold, and the proceeds divided between the unencumbered joint tenant and the creditor or trustee in bankruptcy.

In another vein, it should be noted that a joint tenancy presents an opportunity for a warring spouse to undo the estate plan of his or her mate, by voluntarily transferring his or her interest in the apartment to a third party, thus converting such ownership into a tenancy in common with no survivorship rights.

Tenancy In Common

The third most common method of taking title is called tenancy in common. Under this method, each owner is deemed to hold title to an undivided interest in the entire apartment that each may dispose of as he or she wishes. They share a right of possession only. There is no right of survivorship, meaning that upon the death of one of the owners, his or her shares are passed on to any designated hier or beneficiary. There is also no unity of ownership (as is in a tenancy by the entirety) that would prevent one of the co-tenants from transferring his or her interest to a third party. Accordingly, one tenant in common could transfer his or her interest in the apartment to a third party who could demand to concurrently reside in the apartment with the remaining ownerin effect forcing a roommate on a unwilling cotenant, who could only protect himself by demanding a sale of the unit, and a division of the proceeds. Of course, as previously indicated, a tenancy in common is subject to attachment by judgment creditors and the Bankruptcy Court, who could then force the sale of the unit.

It is important to note that prior to January 1, 1996, any cooperative apartment in which title was taken in two or more names (whether husband or wife or not) without an indication that title was to be as joint tenants, was deemed to be taken as tenants in common without any survivorship rights attached.

Check With Your Attorney

While there are other methods by which one can own cooperative apartments, such as ownership by one spouse only, ownership by a qualified personal residence trust (QPRT) or revocable or living trust, the three addressed above are the most common forms of ownership.

Co-op owners who have been unaware of the differences may wish to check with their attorneys to see what form of ownership they currently have and to discuss whether it would be wise to convert to a different form. Any conversion of the current form of ownership will require the approval of the co-op board and the present lender. While such approvals and retitling of shares and the proprietary lease will undoubtedly incur some costs, such expense may be a very small price to pay for the long-term protection that tenancy by the entirety may afford.

Mr. Braverman is the senior partner of Braverman & Associates, a Manhattan law firm specializing in cooperative and condominium housing law.

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  • Does the survivor's interest in the coop count against his or her right of spousal election under the EPTL?
  • My wife and I purchase our co-op 4 years ago but my name is the only name on the certificate, what will her rights be if I should die
  • Can 1 shareholder be listed as Joint Tenancy on two (2) share certificates ? A grandmother has her grandchild's name on her share certificate. The mother has the same child's name on her certificate. All are listed as in Joint Tenancy.
  • Can room mates who own an equal share of co-op force the other one to sell?
  • It's a shame that there are no laws to protect tenants of domestic partners. My domestic partner and myself have been living in my co-op in Jackson Heights for 5 years and I am unable to add him to the stock certificate because we are unable to get legally married. If anything should happen to me, he would inherit the co-op but he would be forced to sell it and move out of his home.
  • My husband who died in 2008 and I purchased our coop in 190 but his name is the only one on the certificate. In 2005, we obtained a home equity loan as co-borrowers. What are my rihts now?
  • Do I get an answer to my comment by email?. If not where can I find the answer.
  • I believe that there is an error in this article. The article states that upon divorce a TBE is automatically converted to a joint tenancy. I believe that is incorrect - rather, upon divorce a TBE is automatically to a tenancy in common, which carries no survivorship rights.
  • My brother, father and stepmother bought their co-op in Manhattan in 1984, each own equal shares as tenents in common. 10 years ago my father died and a will never surfaced. My stepmother never probated his share of the co-op after his death. Recently my stepmother died. Her will has yet to be probated. Does my stepmothers shares get inherited through her will? If my fathers will surfaces how will his shares be distributed, according to the terms of his will or according to my stepmothers will? What happens if we don't find a will for my father?
  • Married for 37 yrs. & only husb name is on 3 apartments --shouldn't my name be added also to protect them & if anything happened to him, I would have income property?
  • Many years ago, my husband spent my $75,000 earmarked for a down payment on a house in NYC. He never really intended to purchase one. When my student loans came due, he said they were not his problem & would not cut back on eating out 3 meals a day to protect my credit. I had to file for bankruptcy & my private loan lender got a judgment against me, which is nowabout $120,000. We finally ended up movng to the South (where he always wanted to go!) and, because of my judgments, big house, the 2 rental residences & commercial properties are in his name alone. My father gave him my inheritance to invest. The neighbor, a troublemaker, spent 6 years attempting to have me arrested because she was jealous of me & finally succeeded in having me charged with 2 crimes. After 2 trials & $10,000 in legal fees, I was acquitted but she continued to file false police reports. As the DA & cops conspired with her to frame me & the perjury of her 16-year-old daughter & a cop, there was no reason for her not to press charges again. My husband refused to move because he "didn't want her to win!" I now live in my car in NY. I can't rent an apartment (credit, no verifiable income). I worked for my husband for no pay for the last 15 years. Even if I bought an apartment, the creditors would take it away. No one wants a 57-year-ol roommate without a 9-5 job. Question: I have approx. $50,000 in IRAs ($3,500 of it is in a Roth). What would happen if I bought a coop with it? My husband refuses to sell the properties, even in a divorce, refuses to take equity out & refuses to buy an apartment for me. He admits I've done nothing to deserve the way he is treating me. Ironically, on our first date, all he talked about was how well he treated his first wife, who got the house & still owes him money! And I'm thrown out with the garbage.
  • My Mother and father owened their co-op for 35 yrs. My Dad passed away and now my Mom is elderly. Can my sister and I be added to the ownership along with my Mom in order not to lose ownership? If yes what is this form called so I can obtain it? Thank you
  • Can unmarried couples use Tenancy by the Entirety
  • Can someone pls help me with some input/direction regarding the transfer of ownership of a NYC co-op apt from one married spouse to the other spouse. Co-op is currently in both names and they wish to now have the property be 100% owned by one spouse...How can this be done and can taxes be legally avoided with this transaction...Thanks
  • I live in a Co op for over 44 years in Rochdale Village. The Coop wants me to sign a new lease. Is this required?? I have received a 7 day notice. I need advice.
  • Can the board of a co-op association in New York State refuse to recognize "living trusts" and refuse approval across the board of any and all requests to place a property in a living trust?
  • My fiance owns a co-op. When we marry do I become an equal owner? Thanks!!
  • My domestic partner and i purchased a coop 15 yrs ago. The shares are dividing equally between us. Since we have been domestic partners for many years,do we qualify for Tenancy by entirety?
  • My sister and brother-in-law owned a Mitchell-Lama coop in NY for 40 years. He died in 1990 and she died in 2017. The coop management states that her estate can only get 50% of the value of the coop since it was owned by both her and her husband. They said for her estate to get the full 100% I would have to get Letters of Administration for his estate. This would cost the estate around $4,000. Is this correct? What do I need to do to get the 100%?