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How do I pass on my HDFC apartment to relatives?

The rules for succession in an HDFC vary building by building. 

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Question:

I want to pass on my HDFC co-op to my relatives. Can I do that?

Answer:

As in rent-regulated or Mitchell-Lama buildings, HDFC apartments can be passed down to relatives if you follow specific guidelines.

“The general rule in passing on an HDFC is found in the bylaws and proprietary lease of each specific building and in any regulatory agreement governing the building”, says David Hershey-Webb, a partner with Himmelstein, McConnell, Gribben, Donoghue & Joseph LLP.

Approximately 207 of the 1048 HDFCs in the city are subject to a regulatory agreement. The by-laws, proprietary lease and regulatory agreement are called the “governing documents.”

HDFC co-ops, or Housing Development Fund Corporation buildings, offer low-income buyers a chance to own an apartment at a discount, if they meet income requirements. (See Brick’s guide to HDFCs here.)

And though the two share some similarities, unlike Mitchell-Lama co-ops, the succession rules for HDFC co-ops may vary from building to building.

“The general rule I see most often is that to take over the apartment, a family member must have been residing there for two years and be ‘financially responsible.’ I have also seen HDFC by-laws that do not require the person seeking succession to have resided with the shareholder, only to be ‘financially responsible.’” Hershey-Webb says.  

The consent of the HDFC board cannot be unreasonably withheld if such requirements are met. Governing documents may also provide that a spouse can automatically take over an apartment, without board consent. 

For succession rights under rent regulation, a family member could be either a blood relative or non-blood relative who can demonstrate that they share an emotional and financial connection with the tenant. For HDFCs, family member may not be as clearly defined—again, you’ll need to consult the governing documents of the specific building you live in.

Your building may not have a provision for non-traditional family members in its governing documents, but it’s likely that a non-blood relative could still inherit the apartment, if they met the financial restrictions. Many bylaws date back to when HDFCs were first created, in the 1970s and 80s, and public policy around the definition of family has evolved since then.

As for meeting the requirements for being financially responsible, “there’s no bright line rule,” Hershey-Webb says. “A recent appellate decision in a case I won held that if the person seeking the apartment has the ability to pay the maintenance fees and any other charges on an ongoing basis, then they’re financially responsible. That, I believe, is a fair rule consistent with the purposes of the program.”

Some HDFC co-op boards, though, may be seeking more than that. Generally, in order to succeed you in the apartment, the person seeking succession will have to share his or her tax returns to demonstrate they have a steady income stream and meet the income requirements.

There are other financial requirements, too: The person who inherits your apartment will also be responsible for paying any back maintenance fees that are owed.

“In all HDFCs, there are income requirements,” Hershey-Webb says. “The income can’t be too high, because the buildings are set up for low-income tenants and receive certain tax benefits.”

The issue of whether HDFC apartments can be inherited or sold to people who are not low-income, when existing regulatory agreements expire or tax benefits expire, is one that is hotly contested and yet to be fully determined.

If you can’t find anyone who qualifies to take over your apartment under these rules, then the co-op board will put your apartment back onto the market.

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Sam Himmelstein, Esq. represents NYC tenants and tenant associations in disputes over evictions, rent increases, rental conversions, rent stabilization law, lease buyouts, and many other issues. He is a partner at Himmelstein, McConnell, Gribben, Donoghue & Joseph in Manhattan. To submit a question for this column, click here. To ask about a legal consultation, email Sam at shimmelstein@hmgdjlaw.com or call (212) 349-3000.