what is an assignment of proprietary lease

What is a proprietary lease in real estate?

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Homebuyers who buy a unit within a housing cooperative , or co-op for short, are purchasing shares in a corporation. When a buyer becomes a shareholder in a co-op, they are also granted a proprietary lease that gives them the legal right to occupy their particular unit within the co-op community.

What is a proprietary lease?

Also referred to as an occupancy agreement, a proprietary lease is what gives a co-op shareholder the right to occupy their home.

When you buy a co-op, you’re not purchasing what’s referred to as “real property.” The corporation owns the property — typically an apartment building or other residential development — and you own a stake in that corporation. In place of a deed , co-op owners are granted a set number of shares in the corporation, and a proprietary lease to occupy their unit.

The proprietary lease governs all aspects of the relationship between the co-op and each shareholder. It spells out the rights and privileges associated with ownership of the unit, including:

• Who may occupy the unit
• Total monthly maintenance charges (similar to HOA dues )
• Rules governing the sale of the shares in the co-op
• A shareholder’s right to mortgage
• What constitutes a default by a shareholder
• Who is responsible for the maintenance and repair of a unit
• The co-op’s right to terminate the lease

Proprietary lease example

One of the things a proprietary lease governs is who is responsible for fixing problems within a co-op building. For example, if you own a co-op and a pipe bursts inside your bathroom wall, it is generally the co-op’s responsibility to open the wall and fix the pipe. This is different from owning a single-family home , in which you as the owner would be responsible for repairs.

However, the co-op will not necessarily repair or replace anything outside the wall once the pipe is fixed. It will only return the wall to a paintable surface. If you have expensive wallpaper, for example, you will likely have to pay to replace it.

How do proprietary leases work?

A proprietary lease is considered to be a form of residential lease like any other. As a result, the relationship between the co-op and its shareholders is governed by the laws applicable to residential leases: landlord-tenant law.

Of course, before you sign a proprietary lease you’ll need to have your financing in place. Co-op mortgages are slightly different from conventional mortgages , in which the property serves as collateral for the loan. With a cooperative mortgage, the shares in the co-op corporation and the proprietary lease are the collateral. They are typically not as valuable to the lender, because they can’t be sold as easily as actual property.

This is due to the way co-ops are purchased: It’s not as simple as just ponying up the asking price . Co-ops tend to be tight-knit communities, and before being allowed to buy into one, prospective buyers must be vetted by the co-op’s board of directors. They will review a buyer’s finances — and sometimes much more — as well as interview them before deciding whether to permit them to become a shareholder. Because the board needs to keep the corporation solvent, a certain financial threshold, usually including a minimum gross income, is required for prospective buyers. A co-op’s board members are typically volunteer shareholders who are voted on by their fellow shareholders to run the corporation, which places them in the unique legal position of being, in a sense, both landlords and tenants.

Proprietary leases vs. bylaws

Proprietary leases and bylaws both dictate the rules of the co-op. Bylaws focus on rules of the property, like what you can and can’t leave in common areas. Proprietary leases focus on the agreement between the shareholder/tenant and the co-op; they grant rights to use and occupy the property.

Co-ops vs. other types of real estate

Co-ops have several important differences from other types of real estate. The co-op board governs all, and can impose significant restrictions in their bylaws. For example, they can dictate whether or not you can sublet your unit, and who you can sell your property to.

A co-op and a condo may have very similar physical structures. Co-ops usually are cheaper to buy, but they aren’t eligible for low down payment mortgages . They may also have higher monthly fees, which usually include utilities.

The benefits of co-op living include a sense of community in which you know your neighbors (at least by sight) and know that the building is well-managed and everyone is following an agreed-upon set of rules. There won’t be an Airbnb next-door with strangers in and out all the time, for example, or an all-night dance party, or a marching band practicing upstairs. Co-op apartment buildings can feel safer than condo buildings for these reasons, especially in densely populated urban areas — like New York City, where co-ops are extremely common.

Bottom line

A proprietary lease is a special type of lease used for co-ops. Because co-op owners own shares in the overall corporation, rather than owning their units outright as property, the proprietary lease is what gives them the legal right to live in their unit.

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Assignment of Lease

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What is an assignment of lease.

The assignment of lease is a title document that transfers all rights possessed by a lessee or tenant to a property to another party. The assignee takes the assignor’s place in the landlord-tenant relationship.

You can view an example of a lease assignment here .

How Lease Assignment Works

In cases where a tenant wants to or needs to get out of their lease before it expires, lease assignment provides a legal option to assign or transfer rights of the lease to someone else. For instance, if in a commercial lease a business leases a place for 12 months but the business moves or shuts down after 10 months, the person can transfer the lease to someone else through an assignment of the lease. In this case, they will not have to pay rent for the last two months as the new assigned tenant will be responsible for that.

However, before the original tenant can be released of any responsibilities associated with the lease, other requirements need to be satisfied. The landlord needs to consent to the lease transfer through a “License to Assign” document. It is crucial to complete this document before moving on to the assignment of lease as the landlord may refuse to approve the assignment.

Difference Between Assignment of Lease and Subletting

A transfer of the remaining interest in a lease, also known as assignment, is possible when implied rights to assign exist. Some leases do not allow assignment or sharing of possessions or property under a lease. An assignment ensures the complete transfer of the rights to the property from one tenant to another.

The assignor is no longer responsible for rent or utilities and other costs that they might have had under the lease. Here, the assignee becomes the tenant and takes over all responsibilities such as rent. However, unless the assignee is released of all liabilities by the landlord, they remain responsible if the new tenant defaults.

A sublease is a new lease agreement between the tenant (or the sublessor) and a third-party (or the sublessee) for a portion of the lease. The original lease agreement between the landlord and the sublessor (or original tenant) still remains in place. The original tenant still remains responsible for all duties set under the lease.

Here are some key differences between subletting and assigning a lease:

• Under a sublease, the original lease agreement still remains in place.
• The original tenant retains all responsibilities under a sublease agreement.
• A sublease can be for less than all of the property, such as for a room, general area, portion of the leased premises, etc.
• Subleasing can be for a portion of the lease term. For instance, a tenant can sublease the property for a month and then retain it after the third-party completes their month-long sublet.
• Since the sublease agreement is between the tenant and the third-party, rent is often negotiable, based on the term of the sublease and other circumstances.
• The third-party in a sublease agreement does not have a direct relationship with the landlord.
• The subtenant will need to seek consent of both the tenant and the landlord to make any repairs or changes to the property during their sublease.

Here is more on an assignment of lease here .

Parties Involved in Lease Assignment

There are three parties involved in a lease assignment – the landlord or owner of the property, the assignor and the assignee. The original lease agreement is between the landlord and the tenant, or the assignor. The lease agreement outlines the duties and responsibilities of both parties when it comes to renting the property. Now, when the tenant decides to assign the lease to a third-party, the third-party is known as the assignee. The assignee takes on the responsibilities laid under the original lease agreement between the assignor and the landlord. The landlord must consent to the assignment of the lease prior to the assignment.

For example, Jake is renting a commercial property for his business from Paul for two years beginning January 2013 up until January 2015. In January 2014, Jake suffers a financial crisis and has to close down his business to move to a different city. Jake doesn’t want to continue paying rent on the property as he will not be using it for a year left of the lease. Jake’s friend, John would soon be turning his digital business into a brick-and-mortar store. John has been looking for a space to kick start his venture. Jake can assign his space for the rest of the lease term to John through an assignment of lease. Jake will need to seek the approval of his landlord and then begin the assignment process. Here, Jake will be the assignor who transfers all his lease related duties and responsibilities to John, who will be the assignee.

You can read more on lease agreements here .

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Assignment of Lease From Seller to Buyer

In case of a residential property, a landlord can assign his leases to the new buyer of the building. The landlord will assign the right to collect rent to the buyer. This will allow the buyer to collect any and all rent from existing tenants in that property. This assignment can also include the assignment of security deposits, if the parties agree to it. This type of assignment provides protection to the buyer so they can collect rent on the property.

The assignment of a lease from the seller to a buyer also requires that all tenants are made aware of the sale of the property. The buyer-seller should give proper notice to the tenants along with a notice of assignment of lease signed by both the buyer and the seller. Tenants should also be informed about the contact information of the new landlord and the payment methods to be used to pay rent to the new landlord.

You can read more on buyer-seller lease assignments here .

Get Help with an Assignment of Lease

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What Is A Proprietary Lease? Definition & FAQs

Proprietary lease definition

How proprietary leases work

Proprietary leases vs. bylaws

Proprietary lease example

With most types of housing arrangements, the terms are straightforward. When you purchase a house or a condo , you own the property outright, and when you rent your home, you pay a monthly fee in exchange for the right to use the space. But with a co-op, things are a little more complicated.

A co-op is similar to a condo in that you’re buying a share in a larger property. But with a condo, you actually hold title to a specific unit within the building. With a co-op, you’re buying a share in the entire building. This leads to an obvious problem: which unit will you live in? That’s where a proprietary lease comes in.

A proprietary lease is a document you sign when buying into a co-op. Among other things, it gives you the right to live in a specific unit.

So, what does this mean for you, the lessee? Here, we’ll go over the ins and outs of proprietary leases so you know what to expect before you sign.

What Is A Proprietary Lease?

A proprietary lease, sometimes called an occupancy agreement, gives a co-op shareholder the right to occupy a particular unit within the building. In addition, proprietary leases outline the rights and responsibilities of you, the shareholder, and the co-op’s board of directors.

For example, shareholders will have certain rights to renovate their own unit. But they will also have to follow certain procedures and perform regular maintenance and repairs . After all, one person’s leaky toilet is their downstairs neighbor’s ceiling nightmare.

Proprietary leases will also outline the terms for sublets, as well as the standard rules you’ll see in a standard lease or condo association rulebook. There will likely be restrictions on noise during certain hours, for instance.

How Does A Proprietary Lease Work?

When you buy a share in a co-op, you’re not actually purchasing part of a building. What you’re buying is a share in a cooperative corporation. This corporation, in turn, owns an apartment building or complex. When you buy an ordinary house, you receive a deed. When you buy a share in a co-op, you literally receive shares of stock .

You also receive a proprietary lease. This lease gives you certain rights and responsibilities for the use and upkeep of your unit, and it defines the relationship between you and the cooperative corporation. Common lease terms include:

Who is occupying the unit

Whether or not the unit can be sublet

Monthly maintenance charges

Who is responsible for what types of repairs

Whether and how a shareholder can take out a mortgage

How the shareholder may sell their shares

What would constitute a default on the lease

Terms and conditions for the co-op to terminate the lease

A few of these things bear closer examination. First off, there’s the issue of a mortgage or collateral . In most cases, you’ll be able to take out a mortgage, just as you would for a real property. But with a home purchase, the deed serves as collateral. With a co-op mortgage, the shares in the cooperative corporation are the collateral. These shares are more challenging to sell than a traditional house, so lenders tend to charge higher interest rates for co-op mortgages.

It’s also important to understand how co-ops are managed. Along with your shares in the corporation, you have the right to vote for members of the board of directors. In fact, the members of the board will all be fellow shareholders. This puts you in a unique legal situation. On the one hand, you’re a tenant. On the other hand, as a company shareholder, you’re also the landlord . Regardless, the legal system governs co-ops and shareholders according to standard landlord-tenant law.

Keep in mind that there are specific financial requirements to joining a co-op. Most corporations will require a certain minimum income, as well as a minimum lease term before they’ll sell you any shares. You’ll also have to meet with at least some board members in person. On your end, you’ll want to do your due diligence, just as you would when buying a home or purchasing a stock.

How Do Bylaws Affect Co-ops?

Bylaws are rules that govern how the co-op operates, separate from the proprietary leases. A proprietary lease is essentially a landlord-tenant agreement between the shareholder and the corporation. On the other hand, the bylaws define the rules of the cooperative corporation itself.

Bylaws will govern how board members are elected, how often they’re elected, and who is eligible. They’ll outline organizational rules, such as how often the board must meet and how many members constitute a quorum. There will be rules for various subcommittees, outlining their specific authority and responsibilities to the board.

There may also be special bylaws governing board members. Typically, board members will be banned from granting themselves compensation from the corporation. There will also be rules regarding conflicts of interest. Basically, the bylaws ensure that the corporation functions in an effective, transparent manner.

What Is A Proprietary Lease Example?

So, how might you utilize a proprietary lease to your advantage?

Let’s say your upstairs neighbor has a leaky toilet that’s dripping through your ceiling. The proprietary lease will either require building maintenance to fix the toilet or require the upstairs tenant to have their toilet repaired. If you have issues getting the toilet fixed, you could cite the maintenance terms of the lease in your argument to the board.

Another good example is noise restrictions. Most bylaws will prohibit excessive noise during certain hours. If your neighbors are hosting a loud party until 2 in the morning, you can complain to the board.

A proprietary lease is an important document both for tenants and for cooperative corporations. For the corporation, it provides the same protections a standard lease provides to a traditional landlord. For the tenants and shareholders, it provides the peace of mind that your legal house is in order, with all your rights and responsibilities clearly outlined.

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What Is a Proprietary Lease for a Coop Apartment?

A proprietary lease is a binding lease agreement between a shareholder and a cooperative corporation governing the relationship between the parties and the terms of the shareholder’s residency in the building, and more specifically their apartment within the building., table of contents, proprietary lease definition, important sections of the proprietary lease, will the co-op renew my proprietary lease, proprietary lease example.

The proprietary lease is a signed lease agreement between a co-op apartment owner and the board of directors of a cooperative corporation which governs the relationship between the two parties and the terms of the co-op apartment owner’s residency in the building.

Keep in mind that because the coop apartment owner is a shareholder with ownership in the cooperative corporation, the entity that actually owns the building, the shareholder is not considered a statutory tenant under nyc’s rent regulation laws ., rather, the shareholder tenant’s relationship with the cooperative corporation is governed by the proprietary lease as well as new york state business law pertaining to corporations who operate for the benefit of their shareholders., remember that co-op apartments are not considered to be real property since the cooperative corporation actually owns the building., shareholders receive a stock certificate noting how many co-op shares they own, as well as a proprietary lease which enables them to occupy the apartment they “bought,” effectively in perpetuity., difference between the proprietary lease vs co-op by-laws, the co-op’s bylaws dictate how the co-op is organized, managed, how elections are held, indemnifies officers and directors and grants various powers to the co-op., the proprietary lease on the other hand is more focused on the contractual relationship between each shareholder and the cooperative corporation, and the rights and responsibilities of each party., both the co-op bylaws as well as the proprietary lease are considered to be important foundational documents and can usually be found in the original condo or co-op offering plan ., a full service listing for 1%, sell your home with a traditional full service listing for just one percent commission., a proprietary lease is important because it permits the shareholder to occupy the apartment that he or she “bought.” without a proprietary lease, a shareholder only has shares in the cooperative corporation, which doesn’t do the buyer any good if he or she can’t actually reside in the apartment., the proprietary lease dictates how maintenance charges are levied, the proprietary lease will clarify how and when maintenance should be paid (i.e. typically on the 1st of each month), and also confirms that shareholders are responsible for their pro rata share of any co-op special assessments ., the responsibilities of the coop corporation are spelled out, the proprietary lease will typically state that the co-op is responsible for maintaining the building in good condition, including all common areas such as sidewalks, courts, hallways, cellars, stairways, elevators etc., it will also specify what utilities are included, such as hot and cold water and heat., right of inspection of the corporation’s books by shareholders, the proprietary lease gives shareholders the right to inspect the “full and correct books of account” during reasonable hours at the corporation’s main office. the co-op corporation is typically responsible for providing an annual financial report certified by an independent accountant as well (i.e. audited building financial statements for co-ops and condos )., everyone has the same lease, the sample proprietary lease we’ve included below states that “each proprietary lease shall be in the form of this lease, unless a variation … is authorized by at least two-thirds of the lessor’s shares.”, in the event that a revised proprietary lease is approved by a majority vote, then all shareholders will get the new lease..

The coop corporation is totally indemnified

As you might imagine from what little you know about co-ops, the coop corporation is totally indemnified from “all liability, loss, damage and expense arising from injury to person or property occasioned by the failure of the lessee to comply with any provision hereof; or due wholly or in part to any act, default or omission of the lessee or of any person dwelling or visiting in the apartment, or by the lessor, its agents, servants or contractors when acting as agent for the lessee as in this lease provided.”, breaching the house rules is an act of default, the proprietary lease informs the shareholder that the co-op corporation can alter or amend the co-op house rules , and that the house rules are considered to be part of the proprietary lease since it was given in conjunction with the proprietary lease., our sample proprietary lease states that “the lessee hereby covenants to comply with all such house rules and see that they are faithfully observed by the family, guests, employees and subtenants of the lessee. breach of a house rule shall be a default under this lease.”, odor and noises, our sample proprietary lease states that “the lessee shall not permit unreasonable cooking or other odors to escape into the building. the lessee shall not permit or suffer any unreasonable noise or anything which will interfere with the rights of other lessees or unreasonably annoy them or obstruct the public halls or stairways.”, pretty scary considering how subjective some of these terms are, and the lessee is considered to be in default if the terms of the lease and house rules are not followed., shareholders automatically lose if a mechanic’s lien is filed, per the sample proprietary lease we’ve included below, if a “mechanic’s lien against the building building shall be filed purporting to be for labor or material furnished … to or for the lessee … the lessee shall forthwith cause such lien to be discharged by payment, bonding or otherwise; and if the lessee shall fail to do so within ten days after notice from the lessor, then the lessor may cause such lien to be discharged by payment, bonding or otherwise, without investigation as to the validity thereof or of any offsets or defenses thereto, and shall have the right to collect, as additional rent, all amounts so paid and all costs and expenses paid or incurred in connection therewith, including reasonable attorney’s fees and disbursements, together with interest thereon from the time or times of payment.”, this language is extremely scary and should be carefully read by anyone considering buying a coop in nyc or anywhere else, because essentially you automatically lose if you have a dispute with a contractor for any work done on your apartment., for example, a terrible plumber comes by and doesn’t fix your in-unit boiler, but sends you an arbitrary bill for $5,000 anyway for “labor.” you dispute this, and the plumber files a mechanic’s lien. the lien is technically on the entire building, and per the proprietary lease the cooperative corporation will automatically pay it without investigating its merits, and bill you the sum plus any additional costs., essentially, you automatically lose in any dispute with a contractor, and you’d have to find some convoluted way to get that money back, if an appeal or a new lawsuit is even possible. scary, the co-op can force entry into your apartment, not only are you required to share a key to every lock on your door, but if the building’s staff can’t get in, then they are allowed to forcibly enter your apartment (i.e. break in) at your expense., the building only needs to provide you with “reasonable notice,” but otherwise they are allowed to “visit, examine, or enter the apartment … at any reasonable hour of the day upon notice, or at any time and without notice in case of emergency.”, the co-op can terminate your lease and repossess your apartment, the sample proprietary lease we’ve included below states that “the lessor shall have the right to re-enter the apartment and to remove all persons and personal property therefrom, either by summary dispossess proceedings, or by any suitable action or proceeding at law or in equity, or by force or otherwise, and to repossess the apartment” in the event that the shareholder violates the terms of the proprietary lease., a few more of the more interesting conditions that will automatically cause of lease termination are:, lessee becoming bankrupt, unauthorized subletting or occupancy, default in rent, default in other covenants, lessee’s objectionable conduct, the last point is especially scary given the subjectivity of what constitutes “objectionable” conduct. our sample proprietary lease states that if the board determines with a two-thirds vote that the conduct of the lessee or a person dwelling or visiting the apartment is objectionable, and this behavior persists after written notice, then the building can terminate the shareholder’s lease..

Yes, co-op boards will always remember to renew and extend the proprietary lease, typically before it nears 30 years before expiration. That’s because a proprietary lease that expires in under 30 years will cause problems with many banks in regards to extending purchase financing.

As a result, it is the fiduciary duty of the co-op board to remember to extend the proprietary lease and to always keep the expiration date more than 30 years in the future., remember that every shareholder has the same, most updated version of the proprietary lease, meaning someone can’t be singled out., why can’t a co-op board extend a proprietary lease hundreds of years into the future, even though it might seem convenient for a co-op board to extend a proprietary lease hundreds or even thousands of years into the future so they never have to remember to renew it, they don’t do so because such a lengthy lease period might be interpreted by the tax authorities as a transfer of ownership., this isn’t what anyone wants as a transfer of ownership would require the payment of nys and nyc transfer taxes this is why co-op boards will always keep a proprietary lease updated with a term longer than 30 years, but not much more than that., our discretion, your advantage, our traditional partner brokers never openly discount which means less disruption and better execution for you..

PROPRIETARY LEASE

Proprietary Lease, made as of April 23, 2020, by and between NEW YORK COOPERATIVE CORPORATION, a New York Corporation, having an office at 111 Fifth Avenue, New York, New York, hereinafter called the Lessor and John Smith, hereinafter called the Lessee.

Whereas, the Lessor is the owner of the land and the building erected thereon in the County City and State New York known as and by the street number 111 Fifth Avenue, hereinafter called the “building”; and

Whereas, the Lessee is the owner of 100 shares of the Lessor, to which this lease is appurtenant and which have been allocated to apartment 5B in the building;

Demised Premises; Term

Now, therefore, in consideration of the premises, the lessor hereby leases to the Lessee, and the Lessee hires from the Lessor, subject to the terms and conditions hereof, Apartment 5B in the building (hereinafter referred to as the apartment) for a term from April 23, 2020 until December 31, 2092 (unless sooner terminated as herein-after provided). As used herein “the apartment” means the rooms in the building as partitioned on the date of the execution of this lease designated by the above stated apartment number, together with their appurtenances and fixtures and any closets, terraces, maid’s rooms, balconies, roof or portion thereof outside of said partitioned rooms, which are allocated exclusively to the occupant of the apartment.

Rent (Maintenance) How Fixed

1. (a) The rent (sometimes called maintenance) payable by the Lessee for each year, or portion of a year, during the term shall equal the proportion of the Lessor’s cash requirements for such year, or portion of a year, which the number of shares of Lessor allocated to the apartment bears to the total number of shares of shares of the Lessor issued and outstanding on the date of the determination of such cash requirements. Such maintenance shall be payable in equal monthly installments in advance on the first day of each month, unless the Board of Directors of the Lessor (hereinafter called Directors) at the time of its determination of the cash requirements shall otherwise direct.

Lessee shall also pay Lessee’s pro rata share (determined in the same manner as maintenance) of any special assessment that may be levied by Lessor from time to time to pay for any repair, alteration, or improvement to the corporate property, or any deficit operations a prior period, or other cash requirements. Such special assessment shall be deemed additional rent and shall be payable in a lump sum or in periodic installments, as the Directors shall determine. The Lessee shall also pay such additional rent as may be provided for herein when due.

Accompanying Shares to Be Specified in Proprietary Leases

(b) In every proprietary lease heretofore executed by the Lessor there has been specified, and in every proprietary lease hereafter executed by it there will be specified, the number of shares of the Lessor issued to a lessee simultaneously therewith, which number, in relation to the total number of shares of the Lessor issued and outstanding, shall constitute the basis for fixing, as hereinbefore provided, the proportionate share of the Lessor’s cash requirements which shall be payable as rent by the Lessee.

Cash Requirements Defined

(c) Cash requirements whenever used herein shall mean the estimated amount in cash which the Directors shall from time to time in its judgment determine to be necessary or proper for (1) the operation, maintenance, care, alteration and improvement of the corporate property during the year or portion of the year for which such determination is made; (2) the creation of such reserve for contingencies, repairs, replacements and general operations as it may deem proper; and (3) the payment of any obligations, liabilities or expenses incurred or to be incurred, after giving consideration to (i) income expected to be received during such period (other than rent from proprietary lessees), and (ii) cash on hand which the Directors in its discretion may choose to apply. The Directors may from time to time modify its prior determination and increase or diminish the amount previously determined as cash requirements of the corporation for a year or portion thereof. No determination of cash requirements shall have any retroactive effect on the amount of the rent payable by the lessee for any period prior to the date of such determination. All determinations of cash requirements shall be conclusive as to all lessees.

Authority Limited to Board of Directors

(d) Whenever in this paragraph or any other paragraph of this lease, a power or privilege is given to the Directors, the same may be exercised only by the Directors, and in no event may any such power or privilege be exercised by a creditor, receiver or trustee.

Issuance of Additional Shares

(e) If there Lessor shall hereafter issue shares (whether now or hereafter authorized) in addition to those issued on the date of the execution of this lease, the holders of the shares hereafter issued shall be obligated to pay rent at the same rate as the other proprietary lessees from and after the date of issuance. If any such shares are issued on a date other than the first or the last day of a month, the rent for the month in which issued shall be apportioned. The cash requirements as last determined shall, upon the issuance of such shares, be deemed increased by an amount equal to such rent.

Paid-in Surplus

(f) The Directors may from time to time determine how much of the maintenance and other receipts, when received, shall be credited on the corporate accounts to (but not more than such amount as represents payments on account of principal of mortgages on the property and other capital expenditures)

Failure to Fix Cash Requirements

(g) The failure of the Directors to determine the Lessor’ s cash requirements for any year or portion thereof shall not be deemed a waiver or modification in any respect of the covenants and provisions hereof, or a release of the Lessee from the obligation to pay the maintenance or any installment thereof, but the maintenance computed on the basis of the cash requirements as last determined for any year or portion thereof shall thereafter continue to be the maintenance until a new determination of cash requirements shall be made.

Lessor’s Repairs

2. The Lessor shall at its expense keep the building in good repair, including all of the apartments, the sidewalks and courts surrounding the same, and its equipment and apparatus except those portions the maintenance and repair of which are expressly stated to be the responsibility of the Lessee pursuant to Paragraph 18 hereof.

Services by Lesser

3. The Lessor shall maintain and manage the building as a first class apartment building, and shall keep the elevators and the public halls, cellars and stairways clean and properly lighted and heated, and shall provide the number of attendants requisite, in the judgment of the Directors, for the proper care and service of the building, and shall provide the apartment with a proper and sufficient supply of hot and cold water and of heat and if there be central air conditioning equipment supplied by the Lessor, air conditioning when deemed appropriate by the Directors the covenants by the Lessor herein contained are subject, however, to the discretionary power of the Directors to determine from time to time what services and what attendants shall be proper and the manner of maintaining and operating the building, and also what existing services shall be increased, reduced, changed, modified or terminated.

Anything in this Paragraph or Paragraph 2 to the contrary notwithstanding, Lessor shall not be required to repair or replace, or cause to be repaired or replaced, equipment fixtures, furniture, furnishings or decorations installed by the lessee or any of his predecessors in interest nor shall the Lessor be Obligated to repaint or replace wallpaper or other decorations in the Apartment or to refinish floors located therein.

Damage to Apartment or Building

4. (a) If the apartment or the means of access thereto or the building shall be damaged by fire or other cause covered by multi-peril policies commonly carried by cooperative corporations in New York City (and other damage to be repaired by Lessor Lessee pursuant to Paragraphs 2 and 18, as the case may be), the Lessor shall at its own cost and expense, with reasonable dispatch after receipt of notice of said damage, repair or replace or cause to be repaired or replaced with materials of a kind and quality then customary in buildings of the type of the building , then building the apartment and the means of access thereto, including the walls, floors, ceilings, pipes, wiring and conduits in the Apartment. Anything in this paragraph or Paragraph 2 to the contrary, notwithstanding, Lessor shall Not be required to repair replace, or cause to be repaired or replaced, equipment, fixtures, Furniture, furnishings or decorations installed by the Lessee or any of his predecessors in interest nor shall Lessor be obligated to repaint or replace wallpaper or other decorations in the Apartment or to refinish floor located therein.

Rent Abatement

(b) In case the damage resulting from fire or other cause shall be so expensive as to render the apartment partly or wholly untenantable, or if the means of access thereto shall be destroyed, the rent hereunder shall proportionately abate until the apartment shall again be rendered wholly tenantable or the means of access restored; but if said damage shall be caused by the act or negligence of the Lessee or the agents, employees, guests or members of the family of the Lessee or any occupant of the apartment, such rental shall abate only to the extent of the rental value insurance, if any, collected by Lessor with respect to the apartment.

Expiration of Lease Due to Damage

(c) If the Directors shall determine that (i) the building is totally destroyed by fire or other cause, or (ii) the building is so damaged that it cannot be repaired within a reasonable time after the loss shall have been adjusted with the insurance carriers, or (iii) the destruction or damage was caused by hazards which are not covered under the Lessor’s insurance policies then in effect, and if in any such case the record holders of at least two-thirds of the outstanding shares at a shareholders’ meeting duly called for that purpose held within 120 days after the determination by the Directors, shall vote not repair, restore or rebuild, then upon the giving of notice pursuant to paragraph 31 hereof, this Lease and all other proprietary leases and all right, title and interest of the parties thereunder and the tenancies thereby created, shall hereupon wholly cease and expire and rent shall be paid to the date of such destruction or damage. The Lessee hereby waives any and all rights under Section 227 of the Real Property Law and in no event shall the Lessee have any option or right to terminate this Lease, except as provided herein.

Waiver of Subrogation

(d) Lessor agrees to use its best efforts to obtain a provision in all insurance policies carried by it waiving the right of subrogation against the Lessee; and, to the extent that any loss or damage is covered by the Lessor by any insurance policies which contain such waiver of subrogation, the Lessor releases the Lessee from any liability with respect to such loss or damage. In the event that Lessee suffers loss or damage for which Lessor would be liable, and Lessee carries insurance which covers such Loss or damage and such insurance policy or policies contain a waiver of subrogation against the Lessor, then in such event Lessee releases Lessor from any liability with respect to such loss or damage.

Inspection of Books of Account Annual Report

5. The Lessor shall keep full and correct books of account at its principal office or at such other place as the Directors may from time to time determine, and the same shall be open during all reasonable hours to inspection by the Lessee or a representative of the Lessee. The Lessor shall deliver to the Lessee within a reasonable time after the end of each fiscal year an annual report of corporate financial affairs, including a balance sheet and a statement of income and expenses, certified public accountant.

Changes in Terms and Conditions of Proprietary Leases

6. Each proprietary lease shall be in the of this lease, unless a variation of any lease is authorized by at least two-thirds of the Lessor’s shares then issued and executed by the Lessor and Lessee affected. The form and provisions of all the proprietary leases then in effect and thereafter to be executed may be changed by the approval of lessees owning at least 2/3 of the Lessor’s shares then issued, and such changes shall be binding on all lessees even if they did not vote for such changes except that the proportionate share of rent or cash requirements payable by any lessee may not be increased nor may his right to cancel the lease under the conditions set forth in Paragraph 35 be eliminated or impaired without his express consent. Approval by lessees as provided for herein shall be evidenced by written consent or by affirmative vote taken at a meeting called for such purpose. Notwithstanding the foregoing, in no event shall any change in the form of proprietary lease and any of the provisions thereof be made which shall adversely affect certain rights granted to (i) purchasers of unsold Shares (pursuant to Paragraph 38 hereof) or (ii) the Secured Party (its successors or assigns) as set forth in Paragraph 17 (b) below, unless all such purchasers of unsold Shares and the Secured Party affected thereby have unanimously agreed each such change.

Penthouse, Terraces and Balconies

7. If the apartment includes a terrace, balcony, maid’s room or a portion of the roof adjoining a penthouse, the Lessee shall have and enjoy the exclusive use of the terrace, maid’s room, balcony or that portion of the roof appurtenant to the penthouse, subject to the applicable provisions of this lease and to the use of the terrace, balcony or roof by the Lessor to the extent herein permitted. The Lessee’s use thereof shall be subject to such regulations as may, from time to time, be prescribed by the Directors. The Lessor shall have the right erect equipment on the roof, including radio and television aerials and antennas, for its use and the use of the lessees in the building and shall have the right of access thereto for such installations and for the repair thereof. The Lessee shall keep the terrace, balcony or portion of the roof appurtenant to his apartment clean free from snow, ice, leaves and other debris and shall maintain all screens and drain boxes in good condition. No planting, fences, structures or lattices shall be erected or installed on the terraces, balconies or roof of the building without the prior written approval of the Lessor. No cooking shall be permitted on any terraces, balconies or the roof of the building, nor shall the walls thereof be painted by the Lessee without the prior written approval of the Lessor. Any planting or other structures erected by the Lessee or his predecessor in interest may be removed and restored by the Lessor at the expense of the Lessee for the purpose of repairs, upkeep or maintenance of the building.

Assignment of Lessor’ s Rights Against Occupant

8. If at the date of the of this lease, any third party shall be in possession or have the right to possession of the apartment, then the Lessor hereby assigns to the Lessee all of the Lessor’s rights against said third party from and after the date of the commencement of the term hereof, and the Lessee by the execution hereof assumes all of the Lessor’ s obligations to said third party from said date. The Lessor agrees to said third party from said date. The Lessor agrees to cooperate with the Lessee, but at the Lessee’ s expense, in the enforcement of the Lessee’s tights against said party.

Cancellation of Prior Agreements

9. If at the date of the commencement of this lease, the Lessee has the right possession to possession of the apartment under any agreement or statutory tenancy, this lease shall supersede such agreement or statutory tenancy which shall be of no further effect after the date of commencement of this lease, except for claims theretofore arising thereunder.

Quiet Enjoyment

10. The Lessee, upon paying the rent and performing the covenants and complying with the conditions on the part of the Lessee to be performed as herein set forth, shall, at all times during the hereby granted, quietly have, hold and enjoy the apartment without any let, suit, trouble or hindrance from the Lessor, subject, however, to the rights of present tenants or occupants of the apartment, and subject to any and all mortgages and any underlying or overriding lease or ground lease (any such lease being hereinafter collectively called “ground lease”) of the land or building, or both as provided in Paragraph 22 below.

11. The Lessee agrees to save the Lessor harmless from all liability, loss, damage and expense arising from injury to person or property occasioned by the failure of the Lessee to comply with any provision hereof, or due wholly or in part to any act, default or omission of the Lessee or of any person dwelling or visiting in the apartment, or by the Lessor, its agents, servants or contractors when acting as agent for the Lessee as in this lease provided. This paragraph shall not apply to any loss or damage when Lessor is covered by insurance which provides for waiver of subrogation against the Lessee.

Payment of Rent

12. The Lessee will pay the rent to the Lessor upon the terms and at the times herein provided, without any deduction on account of any set-off or claim which the Lessee may have against the Lessor, and if the Lessee shall fail to pay any installment of rent promptly, the Lessee, if Lessor shall in its discretion so demand, shall pay interest thereon at the maximum legal rate from the date when such installment shall have become due to the date of the payment thereof, and such in shall be deemed additional rent hereunder.

House Rules

13. The Lessor has adopted House Rules which are appended hereto; and the Directors may alter, amend or repeal such House Rules and adopt new House Rules. Such House Rules which, when a copy thereof has been furnished to the Lessee, shall be taken to be part hereof, and the Lessee hereby covenants comply with all such House Rules and see that they are faithfully observed by the family, guests, employees and subtenants of the Lessee. Breach of a House Rule shall be a default under this lease. The Lessor shall not be responsible the Lessee to the Lessee for the nonobservance or violation House Rules by any other lessee or person.

Use of Premises

14. The Lessee shall not, without the written consent of the Lessor on such conditions as Lessor may prescribe, occupy or use the apartment or permit the same or any part hereof to be occupied or used for any purpose other than as a private dwelling for the Lessee and Lessee’s spouse, their children, grandchildren, parents, grandparents, brothers and sisters and domestic employees; and in no event shall more than one married couple occupy the apartment without the written consent of the Lessor. In addition to the foregoing, the apartment may be occupied time to time by guests of the Lessee a period for a period of time not exceeding one month, unless a longer period is approved in writing by the Lessor, but no guests may occupy the apartment unless one or more of the permitted adult residents are then in occupancy or unless consented in writing by the Lessor. Notwithstanding the foregoing, (a) Lessee may use the apartment for any home occupation use permitted under applicable zoning law, building code or other rules and regulations of governmental authorities having jurisdiction and (b) the Lessee who is a holder of a block of Unsold Shares (defined in Paragraph 38 below) shall have the right to use the apartment as a model or an office (or both) in connection with the sale or rental of the apartment to which the Unsold Shares are allocated or for any other lawful purpose.

15. Except as provided in Paragraph 1 7 (b) and 38 of this lease, the Lessee shall not sublet the whole or any part of the apartment or renew or extend any previously authorized sublease, unless consent thereto shall have been duly authorized by a resolution of the Directors, or given in writing by a majority of the Directors or, if the Directors shall have failed or refused to give such consent, by Lessees owning at least 65% of the then issued and outstanding shares of the Lessor. Consent by Lessees as provided for herein shall be evidenced by written consent or by affirmative vote taken at a meeting called for such purpose. Any consent to subletting may be subject to such conditions as the Directors or Lessees, as the case may be, may impose. There shall be no limitation on the right of Directors or Lessees to grant or withhold consent to a subletting for any or no reason except as limited by law or the provisions of paragraph 48 hereof. No consent to a subletting shall operate to release the Lessee from any obligation hereunder.

16. (a) The Lessee shall not assign this lease or transfer the shares to which it is appurtenant or any interest therein, and no such assignment transfer shall take effect as against the Lessor for any purpose, until (i) An instrument of assignment in form approved by Lessor executed and acknowledged by the assignor shall be delivered to the Lessor; and (ii) An agreement executed and acknowledged by the assignee in form approved by Lessor assuming and agreeing to be bound by all the covenants and conditions of this lease to be performed or complied with by the Lessee and after the effective date of said assignment shall have been delivered to the Lessor, or, at the request of the Lessor, the assignee shall have surrendered the assigned Lease and entered into a new lease in the same form for the remainder of the term in which case the Lessee’s lease shall be deemed cancelled as of the effective date of said assignment; and (iii) All shares of the Lessor to which this Lease is appurtenant shall have been transferred to the assignee, with proper transfer taxes paid and stamps affixed; and (iv) All sums due from the Lessee shall have been paid the Lessor, together with a sum to be fixed by the Directors to cover reasonable legal and other expenses of the Lessor and its managing agent in connection with such assignment and transfer of shares (subject to Paragraph 17(b) and 38 hereof; and (v) A search or certification from a title or abstract company as the Directors may require shall be delivered to Lessor; and (vi) Except in the case of an assignment transfer or bequest of the shares and this lease to the Lessee’s spouse or adult siblings or parents, and except as otherwise provided in Paragraphs 17 (b) and 38 of this lease, consent to such assignment shall have been authorized by resolution of the Directors, or given in writing by a majority of the Directors or, if the Directors shall have failed or refused to give such consent 30 days after submission of references to them or Lessor’s agent, then by lessees owning of record at least 65% of the then issued shares of the Lessor. Consent by lessees as provided for herein shall be evidenced by written consent or by affirmative vote taken at a meeting duly called for such purpose.

Consents: On Death of Lessee

(b) If the Lessee shall die, consent shall not be unreasonably withheld to an assignment of the lease and shares to a financially responsible member of the Lessee’s family (other than the Lessee’ s spouse, adult siblings or parents as to whom no consent is required).

Consents Generally: Stockholders’ and Directors’ Obligations to Consent

(c) There shall be no limitation, except as above specifically provided, on the rights of Directors or lessees to grant or withhold consent, for any reason or for no reason, to assignment. An assignment from a lessee to anyone who at the time of said assignment is already a stockholder of Lessor shall not require the consent of Directors or lessees.

Release of Lessee Upon Assignment

(d) If the lease shall be assigned in compliance herewith, the Lessee-assignor shall have no further Liability on any of the covenants this lease to be thereafter performed.

Further Assignment or Subletting

(e) Regardless of any prior consent theretofore given, neither the Lessee nor his executor, nor administrator, nor any trustee or receiver of the property of the Lessee, nor anyone to whom the interests of the Lessee shall pass by law, shall be entitled further to assign this lease, or to sublet the apartment, or any part thereof, except upon compliance with the requirements of this lease.

Statement by Lessor

(f) If this lease is then in force and effect, Lessor will upon request Of Lessee, deliver to the assignee a written statement to that effect; but no such statement shall be deemed an admission that there is no default under the lease.

Pledge of Shares and Lease

17. (a) A pledge of this lease and the shares to which it is appurtenant shall not be a violation of this lease; but, except as otherwise provided elsewhere herein, neither the pledgee nor any transferee the pledged security shall be entitled to have the shares transferred of record on the books of the Lessor, nor to vote such shares, nor to occupy or permit the occupancy by others of the apartment, nor to sell such shares or this Lease, without first obtaining the consent Of the Lessor in accordance with and after complying with all of the provisions of Paragraphs 14, 15 or 16, as the case may be. The acceptance by Lessor of payments by the pledgee or any transferee of the pledged security on account of rent or additional rent shall not constitute a waiver of the aforesaid provisions.

Secured Party

(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 17 or any other provision of this lease to the contrary, the following provisions of this Paragraph shall govern and be binding.

(i) The Lessor agrees that it shall give to any holder of a security interest in the shares of the Lesser specified in the recitals of this lease or mortgage of this lease who so requests (any such holder being hereinafter referred to as a “Secured Party”) a copy of any notice of default which the Lessor gives the Lessee pursuant to the terms of this lease, and if the Lessee shall fail cure the default specified in such notice within the time and in the manner provided for in this lease, then the Secured Party shall have an additional period of time, equal to the time originally given to the Lessee, to cure said default for the account of the Lessee or to cause same to be cured, and the Lessor will not act upon said default unless and until the time in which the Secured Party may cure said default or cause same to be cured, as aforesaid, shall have elapsed and the default shall not have been cured.

(ii) If this lease is terminated by the Lessor as provided in Paragraphs 31 or 35 of this Lease, or by agreement with the Lessee, (1) the Lessor promptly shall give notice of such termination to the Secured Party (2) upon request of the Secured Party made within thirty (30) days of the giving of such notice, the Lessor (i) shall and commence and prosecute a summary dispossess proceeding to obtain possession of the apartment, and (ii) shall, within sixty (60) days of its receipt Of the aforesaid request by the Secured party, reissue the aforementioned shares to, and (with respect to any termination other than under Paragraph 36 below) shall enter into a new proprietary lease for the apartment with, any individual designated by the Secured party, or the individual nominee of the individual so designated by the Secured Party, all without the consent of the Directors or the shareholders to which reference is made in  Paragraph 16 (a) (vi) and 32(c) but with the consent only of the Lessor’s then managing agent which shall not be unreasonably withheld or delayed, provided, however , that the Lessor shall have received payment of all additional rent and other sums owed by the Lessee to the Lessor under this lease for the period ending on the date of reissuance of the aforementioned shares of the Lessor including, without Limitation, sums owed under Paragraphs 32 (a) and (c) of this Lease. The individual designated by the secured Party, if and as long as such individual (by himself or a member of his family) does not actually occupy the apartment, shall have all of the rights provided for in Paragraphs 15, 16, 21 and 38 of this lease as if he were a holder of Unsold Shares; and accordingly, no surplus shall be payable by the Lessor to the Lessee as otherwise provided in Paragraph 32(c).

(iii) If the purchase by the Lessee of the shares allocated to the apartment was financed by a loan made by a bank, savings bank savings and loan association and a default or an event of default shall have occurred under the terms of the agreement or leasehold mortgage entered into between the Lessee and the Secured Party, and if (1) notice of said default or event default shall have been given to the Lessor, (2) an individual designated by the Secured Party, or the individual nominee of the individual so designated by the Secured Party, shall be entitled to become the owner of the shares and the lessee under this lease pursuant to the terms of said security agreement or leasehold mortgage, (3) not less than five days written notice of an intended transfer of the shares and this lease shall have been given the Lessor and the Lessee, (4) there has been paid all rent, additional rent and other sums owed by the Lessee to the Lessor under this lease for the period ending on the date of transfer of the aforementioned shares and (5) the Lessor shall be furnished with such affidavits, certificates, and opinions of counsel, in form and substance reasonably satisfactory to the Lessor, indicating that the foregoing conditions (1) through (4) have been met, then (a) a transfer of the shares and the proprietary lease shall be made to individual upon request, and without the consent of Directors or the share—holders to which reference is made in Paragraph 16(a) (vi) but with the consent only of the Lessor’s then managing agent which shall be unreasonably withheld or delayed, and (b) the individual whom such transfer is made (if and as long as such individual, by himself or a member of his family, does not actually occupy the apartment) shall have all of the rights provided for Paragraphs 15,16,21 and 38 Of this lease as if he were a holder of Unsold Shares.

(iv) Without the prior written consent of any Secured Party who has requested a copy any notice of default as hereinbefore provided in subparagraph (a) of this Paragraph 39, (a) the Lessor and the Lessee will not enter into any agreement modifying or cancelling this lease (b) no change in the forms, terms or conditions Of this lease, as permitted by Paragraph 6, shall eliminate or modify any rights, privileges or obligations of a Secured Party as set forth in this Paragraph 17, (c) the Lessor will not terminate or accept a surrender of this lease, except as provided in Paragraphs 31 or 35 of this lease and in subparagraph (b) (i) Of this Paragraph 17, (d) the Lessee will not assign this lease or sublet the apartment, (e) any modification, cancellation, surrender, termination or assignment of this lease or any sublease of the apartment not made in accordance with the provisions hereof shall be void and of no effect, (f) the Lessor will not consent to any further mortgage on this lease or security interest created in the shares, (g) the Lessee will not make any further mortgage or create any further security interest in the shares and (h) any such further mortgage or security interest be void and of no effect.

(v) Any designee of a Secured Party to whom a transfer of a lease shall have been made pursuant to the terms of this subparagraph (b) may cancel this lease under the terms of Paragraph 35 hereof; except that such designee (a) may cancel this lease at any time after the designee acquires this lease and the shares appurtenant hereto due to foreclosure of the security agreement leasehold mortgage; (b) need give only thirty (30) days’ notice of its intention to cancel; and (c) may give such notice at any time during the calendar year.

(vi) A Secured Party claiming or exercising any of the rights and privileges granted it pursuant to the provisions of this subparagraph (b) shall be deemed to have agreed to indemnify Lessor for all loss, liability or expense (including reasonable attorneys’ fees) arising out of claims by Lessee, or big successors or assigns, against Lessor or the Secured Party, or their respective successors or assigns, for acts or omissions to act on the part of either Lessor or Secured Party, or their respective successors or assigns, pursuant to this subparagraph (b). Lessor will give the Secured Party written notice with reasonable promptness of any such claim against Lessor; and the Secured party may contest such claim in the name and on behalf of Lessor with counsel selected by the Secured Party at the Secured party’s sole expense. Lessor shall execute such papers and do such things as are reasonably necessary to implement the provisions of this subpart (vi).

(vii) Upon Lessee’s final payment under the loan given by the Secured Party or upon prepayment said Loan Secured Party viii give Lessor notice of such final payment or prepayment (as case may be).

(viii) Upon request of the purchaser of Unsold Shares referred to in Paragraph 38 below), Lessor shall enter into an agreement (commonly known as a *Recognition Agreement*) with a Secured Party pursuant to which Lessor will acknowledge and agree that the foregoing provisions of this subparagraph (b) shall ensure to the benefit of, and apply to, the Secured Party. The Recognition Agreement may contain such additional or different provisions as the Secured Party may request and Lessor shall execute and deliver same to Lender provided only that such additional or different provisions are approved by counsel to Lessor (which approval may not be unreasonably withheld or delayed and shall be given or deemed given if same are substantially similar tenor to the provisions if this subparagraph (b)). All costs and expenses incurred by Lessor in connection with such Recognition Agreement (including legal fees) shall be borne entirely by Lessor, and no charge therefor may be assessed to said purchaser of Unsold Shares, or his successors or assigns, including the individual acquiring this lease and the appurtenant shares from the purchaser of Unsold shares. The provisions of this subpart (viii) shall not apply to a lessee who is not a purchaser of Unsold Shares.

(ix) Subject to the provisions of subpart (viii) above, a Recognition Agreement between a Lender and Lessor may contain such additional or different provisions as the Lessor and said Lender may agree to.

Repairs by the Lessee

18. (a) The Lessee shall take possession of the apartment and its appurtenances and fixtures “as is” as of the commencement of the tern hereof. Subject to the provisions of Paragraph 4 above, the Lessee shall keep the interior of the apartment (including interior walls, floors and ceilings but excluding windows, window panes, window frames, sashes, sills, entrance doors, frames and saddles) in good repair, shall do all of the painting and decorating required to his apartment, including the interior of window frames, sashes and sills, and shall be solely responsible for the maintenance, repair and replacement of plumbing , gas and heating fixtures and equipment and such refrigerators, dishwashers, removable and through-the-wall air conditioners, washing machines, ranges and other appliances, as may be in the apartment. Plumbing, gas and heating fixtures as used herein shall include exposed gas, steam and water pipes attached to fixtures, appliances and equipment and the fixtures, appliances and equipment to which they are attached, and any special pipes or equipment which the Lessee may install within the wall or ceiling, or under the floor, but shall not include gas, Steam, water or other pipes or conduits within the walls, ceilings or floors or air conditioning or heating equipment which is part of the standard building equipment. The Lessee shall be solely responsible for the maintenance, repair and replacement of all lighting and electrical fixtures, appliances, and equipment, and all meters, fuse boxes or circuit breakers and electrical wiring and conduits from the junction box at the riser into and through the Lessee’s apartment. Any ventilator or air conditioning device which shall be visible from the outside of the building shall at all times be painted by the Lessee in a standard color which the Lessor may select for the building. Lessee shall be solely responsible for the maintenance, repair and replacement of doors leading from the apartment to any maid’s room, penthouse, terrace or balcony or any solarium.

Odors and Noises

(b) The Lessee Shall not permit unreasonable cooking or other odors to escape into the building. The Lessee shall not permit suffer any unreasonable noise or anything which will interfere with the rights of other lessees or unreasonably annoy them or obstruct the public halls or stairways.

Equipment and Appliances

(c) If, in the Lessor’s sole judgment, any of the Lessee’s equipment or appliances shall result in damage to the building or poor quality or interruption of service to other portions of the building, or overloading of, or damage to facilities maintained by the Lessor for the supplying of water, gas, electricity or air conditioning to the building, or if any such appliances visible from the outside of the building shall become rusty or discolored, the Lessee shall promptly, on notice from the Lessor, remedy the condition and , pending such remedy, shall cease using any appliance or equipment which may be creating the objectionable condition.

Rules and Regulations and Requirements of Mortgage

(d) the Lessee will comply with all the requirements of the Board of Fire Underwriters, insurance authorities and with all law, ordinances, rules and regulations with respect to the occupancy or use of the apartment. If any mortgage or ground lease affecting the land or the building shall contain any provisions pertaining to the right of the Lessee to make changes or alterations in the apartment, or to remove any of the fixtures, appliances, equipment or installations the Lessee herein shall comply with the requirement of such or mortgage or mortgages and ground lease relating thereto. Upon the Lessee’s written request, Lessor will furnish Lessee with copies of applicable provisions of each and every such mortgage.

Lessor’s Right to Remedy Lessee’s Defaults

19. If the Lessee shall fail for 30 days after notice to make repairs to any part of the apartment, its fixtures or equipment as herein required, or shall fail to remedy a condition which has become objectionable to the Lessor for reasons above set forth, or if the Lessee or any person dwelling in the apartment shall request the Lessor, its agents or servants to per any act not hereby required to be performed by the Lessor, the Lessor may make such repairs, or arrange for others do the same, or remove such Objectionable condition or equipment, or perform such act, without liability on the Lessor; provided that, if the condition requires prompt action, notice less than 30 days may be given or, in case of emergency, no notice need be given. In all such cases the Lessor, its agents, servants and contractors shall, as between the Lessor and Lessee, be conclusively deemed to be acting as agents of the Lessee and all contracts therefor made by the Lessor shall be so constructed whether or not made in the name of the Lessee if Lessee shall fail to perform or comply with any of the other covenants or provisions of this lease within the time required by a notice from Lessor (not less than 5) then Lessor may, but shall not be obligated, to comply herewith, and for such purpose may enter upon the apartment of Lessee.

The Lessor shall be entitled to recover from the Lessee all expenses incurred or for which it has contracted hereunder, such expenses to be payable by the Lessee only and as additional rent.

Increase in Rate of Fire Insurance

20. The Lessee shall not permit or suffer anything to be done or kept in the apartment which will increase the rate of fire insurance on the building or the contents thereof. If, by reason of the occupancy or use of the apartment by the Lessee, the rate of fire insurance on the building or an apartment or the contents of either shall be increased, the Lessee shall (if such occupancy or use continues for more than 30 days after written notice from the Lessor specifying the objectionable occupancy or use) become personally liable for the additional insurance premiums incurred by Lessor or any lessee or lessees of apartments in the building on all policies so affected, and the Lessor shall have the right to collect the same for its benefit or the benefit of any such lessees as additional rent for the apartment due on the first day of the calendar month following written demand therefor by the Lessor.

Alterations

21. (a) The Lessee shall not, without first obtaining the written consent of the Lessor, which consent shall not be unreasonably withheld or delayed, make in the apartment or building, or on any roof, penthouse, terrace or balcony appurtenant thereto, any alteration, enclosure or addition or any alteration Of or addition to the water, gas, or steam risers or pipes, heating or air conditioning system or units, electrical conduits, wiring or outlets, plumbing fixtures, intercommunication or alarm system, or any other installation facility in the apartment or building. The performance by Lessee of any work in the apartment shall be in accordance with any applicable rules and regulations of the Lessor and governmental agencies having jurisdiction thereof and may not impinge on common areas of the building without Lessor’s consent. The Lessee shall not in any case install any appliances which will overload the existing wires or equipment in the building. Anything herein or in subparagraph (b) below to the contrary notwithstanding, the consent of the Lessor shall not be required for any of the foregoing alterations, enclosures or additions made by, or the removal of any additions, improvements or fixtures from the apartment by, a holder of Unsold Shares.

Notwithstanding the foregoing, no additions, alterations or improvements shall be made by a holder of Unsold Shares in the public areas of the building or in any apartment not leased to such holder of unsold Shares other than pursuant to a duly filed amendment and without first obtaining the consent of the Lessor (which consent shall not be unreasonably withheld or delayed) and (if applicable) the lessee of such other apartment.

Removal of Fixtures

(b) Without Lessor’s written consent, the Lessee shall not remove any fixtures, appliances, additions or improvements from the apartment except as hereinafter provided. If the Lessee, or a prior lessee, shall have heretofore placed, or the Lessee Shall hereafter place in the apartment, at the Lessee’s own expense, any additions, improvements, appliances or fixtures, including but not limited to fireplace mantels, lighting, fixtures, refrigerators, air conditioners, dishwashers, washing machines, ranges, woodwork, wall paneling, ceilings, special doors or decorations, special cabinet work, special stair railings or other built—in ornamental items, which can be removed without structural alterations or permanent damage to the apartment, then title thereto shall remain in the Lessee and the Lessee shall have the right, prior to the termination of this lease, to remove the same at the Lessee’s own expense, provided: (i) that the Lessee at the time of such removal shall not be in default in the payment of rent or in the performance or observance of any other covenants or conditions of this lease; (ii) that the Lessee shall, at the Lessee’s own expense, prior to the termination of this lease, repair all damage to the apartment which shall have been caused by either the installation or removal of any of such additions, improvements, appliances or fixtures; (iii) that if the Lessee shall have removed from the apartment any articles or materials owned by the Lessor or its predecessor in title, or any fixtures or equipment necessary for the use of the apartment, the Lessee shall either  restore such articles and materials and fixtures and equipment and repair any damage resulting their removal and restoration, or replace them with others of a kind and quality customary in comparable buildings satisfactory to the Lessor; (iv) that if any mortgagee had acquired a lien on any such property prior to the execution of this lease, Lessor shall first procure from such mortgagee its written consent to such removal, and any cost and expense incurred by the Lessor in respect thereof shall have been paid by the Lessee; and (v) that prior to any such removal, the Lessee shall give written notice thereof to the Lessor.

Surrender on Expiration of Term

(c) On the expiration or termination of this lease, the lessee shall surrender to the Lessor possession of apartment with all additions, improvements, appliances and fixtures then included therein, except as hereinabove provided.

Any additions, improvements, fixtures or appliances not removed by the lease, shall at the option of the Lessor, be deemed abandoned and shall become the property of the Lessor and may be disposed of by the lessor without liability or accountability to the lessee. Any other personal property not removed by the lessee at or prior to the termination of this lease may be removed by the Lessor to any place of storage and stored for the account of trespass, conversion or negligence by reason of any acts of the Lessor or of the Lessor’s agents, or of any carrier employed in transporting such property to the place of storage, or by reason of the negligence of any person in caring for such property while in storage.

Lease Subordinate to Mortgages and Ground Leases

22. This lease is and shall be subject and subordinates to all present and future ground leases and to any mortgages now or hereafter liens upon such leases or on the land and building or buildings, and to any and all extensions, modification, consolation, renewals and replacements thereof and to all security agreements and chattel mortgage on personal property covered by any ground lease or mortgage. This clause shall be self-operative and no further instrument of subordination the lessee shall at any time, and from time to time demand, execute any instruments that may be required by any mortgage, or by the Lessor, for the purpose of more formally subjecting this lease to the lien of any such mortgage or mortgages or ground leases, and the duly elected officers, for the time being, of the Lessor are and each of them is hereby irrevocably appointed the attorney such demand, and the Lessee hereby ratifies any such instrument hereafter executed by virtue of the power of attorney hereby given.

In the event that a ground lease is executed and delivered to the holder of a mortgage or mortgages on such ground lease or to a nominee or design of or a corporation formed by or to a nominee or design of or a corporation formed by or for the benefit of such holder, the Lessee hereunder will attorn to such mortgage or the nominee or designee of such mortgagee or to any corporation formed by or for the benefit of such mortgagee.

Mechanic’s Lien

23. In case a notice of mechanic’s lien against the building shall be filled purporting to be for labor or material furnished or delivered at the building or the apartment to or for the Lessee, or anyone claiming under the Lessee, the Lessee shall forthwith cause such lien to be discharged by payment, bonding or otherwise, without investigation as to the validity thereof or of any offsets or defenses thereto, and shall have the right to collect , and expense paid or incurred in connection therewith, including reasonable attorney’s fees and disbursement, together with interest thereon from the time or times payment.

Corporation

24. The lessee shall always in good faith endeavor to observe and promote the cooperative purposes for the accomplishment of which the Lessor is incorporated.

Right of Entry; Key

25. The Lessor and its agents and their authorized workmen shall be permitted to visit, examine, or enter the apartment and any storage space assigned to Lessee at any reasonable hour of the day upon notice, or at any time and without notice in case of emergency, to make or facilitate repairs in any part of the building or to cure any default by the Lessee’s and to remove such portions of the walls, floors and ceilings of the apartment and storage space to its proper and usual condition at Lessor’s expense if such repairs are the obligations of Lessee’s, family , guests, agents, employees or subtenants. In order that the Lessor shall at times have access to the apartment or storage rooms for the purposes provided for this lease, the Lessee Shall provide the Lessor with a key to each lock providing access to the apartment or the storage room, and if any lock shall be altered or new lock installed, the lessee shall provide the Lessor with a key thereto immediately upon installation. If the lessee shall not be personally presents to open and permit an entry at any time when an entry therein shall be necessary or permissible hereunder and shall not have furnished a key to Lessor, the Lessor or the Lessor’s agents(but, except in an emergency, only when specifically authorized by an officer of the Lessor or an officer of the managing agent of Lessor) may forcibly enter the apartment or storage space without liability for damages by reasons thereof (if during such entry , the Lesser shall accord reasonable care to the Lessee’s property) and without in any manner affecting the obligations and covenants of this lease. The right and authority hereby reserved do not impose, nor does the lessor assume by reason thereof any responsibility or liability for the care or supervision of the apartment, or any of the pipes, fixtures, appliance or appurtenances therein contained, except as herein specially provided.

26. The failures of the Lessor to insist, in any one or more instances, upon a strict performance of any right or option herein contained, or to serve any notice, or to institute any actions or proceeding, shall not be construed as a waiver or a relinquishment for the future, of any such provisions, options or rights, but such provision, option or right shall continue and remain full force and effects. The receipt by the lessor of rent, with knowledge of the breach, and no waiver by the lessor of any provision hereof shall be deemed to have been made unless in writing expressly approved by the Directors.

27. Any notice by or demand from either party to the other shall duly give only if in writing and sent by certified or registered mail, return receipts requested: if by the Lessee, addressed to the lessor at building with a copy sent by regular mail to the Lessor’s managing agent; if to the Lessee, addressed to the building. Either party may be notice served in accordance herewith designate a different address for service of such notice or demand. Notices or demands shall be deemed given on the date when mailed, expect notices of change of address shall be deemed served when received.

Reimbursement of Lessor’s Expenses

28. If the Lessee shall at any time be in default hereunder and the lessor shall incur any expense (whether paid or not ) performing acts which the Lessee is required to perform , or in instituting any actions or proceeding based on such defaults or defending or asserting a counterclaim in any action or proceeding brought by the lessee, the expense thereof to the lessor , including reasonable attorney’s fees and disbursement, shall be paid by the Lessee the Lessor , on demand , as additional rent.

Lessor’s Immunities

29. (a) The Lessor shall not be liable, except by the reason of Lessor’s negligence, for any failure or insufficiency of heat, or of air conditioning (where air conditioning is supplied or air conditioning equipment is maintained by the Lessor), water supply, electric current, gas, telephone, or elevator services or other service to be supplied by the Lessor hereunder, or for interference with light, air view or other compensation or claims of eviction shall be made or allowed because of the making or failures to make or delay in making any repairs, alteration or decorations to the building or any fixture or appurtenances therein, or for space taken to comply with any law, ordinance or governmental regulation, or for interruption or curtailment of any services agreed to be furnished by the Lessor, due to accidents, alteration or repairs, or to difficulty or delay in securing supplies or labor or other cause beyond Lessor’s control, unless due to Lessor’s negligence.

Storage Space and Laundry

(b) If the Lessor shall furnish to the Lessee any storage bins or space, the use of the laundry or any facility outside the apartment, including but not limited to a television antenna, the same shall be deemed to have been furnished gratuitously by the Lessor under revocable license. The Lessee shall not use such storage space for the storage space for the storage of valuable or perishable property and any such storage space assigned to Lessee shall be kept by Lessee shall use the same on the understanding that such machines or equipment may or may not be in good order and repair and that the Lessor is not responsible for such equipment, nor for any damage caused to the property of the Lessee resulting from the Lessee’s use thereof, and that any use that Lessee may make of such equipment shall be at his own cost, risk and expense.

Automobiles and Other Property

(c) The lessor shall not be responsible for any damage to any automobile or other vehicle left in the care of any automobile or other vehicle left in the case of any employee of the Lessor by the Lessee, and the lessee hereby agrees to hold the lessor harmless from any liability arising any injury person or property caused by or with such automobile vehicle while in the care of such employee. The Lessor shall not be responsible for any property left with or entrusted to any employee Of the Lessor, or for the loss or damage to any property within or without the apartment by theft or otherwise.

Window Cleaning

30. The Lessee will not require, permit, suffer or the cleaning of any window in the premises from the outside (within the meaning of Section 202 of the New York Labor Law) unless the equipment and safety devices required by law, ordinance, rules and regulations, including, without limitation, Section 202 of the New York Labor Law, are provided and used, and unless the industrial code of the State of New York is fully complied with; and the Lessee hereby agrees to indemnify the Lessor and its employees, as a result of the Lessee’s requiring, suffering or allowing any window in the premises to be cleaned the outside in violation of the requirements of the aforesaid laws, ordinances, regulations and rules.

Termination of Lease by Lessor

31. If upon, or at any time after, the happening of any events mentioned in subdivisions (a) to (j) inclusive of this Paragraph 31, the Lessor shall give to the Lessee a notice stating that the term hereof will expire on a date at least five days thereafter, the term of this lease shall expire on the date so fixed in such notice as fully and completely as if it were the date herein definitely fixed for the expiration of the term, and all right, title and interest of the Lessee hereunder shall thereupon wholly cease and expire, and the Lessee shall thereupon quit and surrender the apartment to the Lessor, it being the intention of the parties hereto to create hereby a conditional limitation and thereupon the Lessor shall have the right personal re-enter the apartment and to remove all persons and personal property therefrom, either by summary dispossess proceedings, or by any suitable action or proceeding at law or in equity, or by force otherwise, and repossess the apartment in its former estate as if this lease had not been made, and no liability whatsoever shall attach to the Lessor by reason of the exercise of the right of re-entry, re-possession and removal herein granted and reserved.

Lessee Ceasing to Own Accompanying Shares

(a) If the Lessee shall cease to be the owner of the shares to which this lease is appurtenant, or if this lease shall pass or be assigned to anyone who is not then the owner of all said shares;

Lessee Becoming a Bankrupt

(b) If at any time during the term of this lease (i) the then holder hereof shall be adjudicated a bankrupt under the laws of the United States; or (ii) a receiver of all property of such holder or of this lease shall be appointed under any provision of the laws the State of New York, or under any statute of the United states, or any statute of any state of the United States and the order appointing such receiver shall not be vacated within thirty days; or (iii) such holder shall make a general assignment for the benefit of creditors; or (iv) any of the shares owned by such holder to which this lease is appurtenant shall be duly levied upon under the process of any whatever unless such levy shall be discharged within thirty days; or (v) this lease or any of the shares to which it is appurtenant shall pass by operation of law or otherwise to anyone other than the Lessee herein named or a person to whom such Lessee has assigned this lease in the manner herein permitted, but this subsection (v) shall not be applicable if this lease shall devolve upon the executors or administrators of the Lessee and provided that within eight (8) months (which period may be extended by the Directors) after the death of the Lessee this lease and shares shall have been transferred to an assignee in accordance with Paragraph 16 hereof; or (vi) This lease or any of the shares to which is appurtenant shall pass to anyone other than the Lessee herein named by reason of a default by the Lessee under a pledge, security agreement or a leasehold mortgage made by the Lessee subject to the provisions of paragraph 17;

Assignment, Subletting or Unauthorized Occupancy

(c) If there be an assignment of this lease, or any subletting hereunder, without full compliance with the requirements of Paragraphs 15 or 16 hereof; or if any person not authorized by Paragraph 14 shall be permitted to use or occupy the apartment, and the Lessee shall fail to cause such unauthorized person to vacate the apartment within ten days after written notice from the Lessor;

Default in Rent

(d) If the Lessee shall be in default for a period of one month in the payment of any rent or additional rent or of any installment thereof and shall fail to cure such default within ten days after written notice from the Lessor;

Default in Other Covenants

(e) If the Lessee shall be in default in the performance of any covenant or provision hereof, other than the covenant to pay rent, and such default shall continue for thirty days after written notice from the Lessor; provided, however, that if said default consists of the failure to perform any act the performance of which requires any substantial period of time, then if  within said period of thirty days such performance is commenced and thereafter diligently prosecuted to conclusion without delay and interruption, the Lessee shall be deemed to have cured said default;

Lessee’s Objectionable Conduct

(f) If at any time the Lessor shall determine, upon the affirmative vote of two-thirds of its then Board of Directors, at a meeting duly called for that purpose, that because of objectionable conduct on the part of the Lessee or of a person dwelling or visiting in the apartment repeated after written notice from Lessor, the tenancy of the Lessee is undesirable; (it being understood, without limiting the generality of the foregoing, that repeatedly to violate or disregard the House Rules hereto attached or thereafter established in accordance with the provisions of this lease, or to permit or tolerate a person of dissolute, loose or immoral character to enter or remain in the building or the apartment shall be deemed to be objectionable conduct);

Termination of All Proprietary Leases

(g) if at any time the Lessor shall determine, upon the affirmative of two-thirds of its then Board of Directors at a meeting such directors duly called for that purpose, and the affirmative vote of the record holders of at least 80% in amount of its then issued shares, at a shareholders’ meeting duly called for that purpose, to terminate all proprietary leases;

Destruction of Building

(h) If the building shall be destroyed or damaged and the shareholders shall decide not repair or rebuild as provided in Paragraph 4;

Condemnation

(i) If at any time the building or a substantial portion thereof shall be taken by condemnation proceedings;

Lessee’s Default Under Security Agreement

(j) If Lessee shall default in the payment or performance of any of Lessee’s obligations under any pledge or other security agreement (the “Security Agreement”) given a Secured Party (who has complied with the provisions of the said Paragraph 17 (b), and written notice of such default is given to the Lessor by the secured Party or its counsel.

Lessor’s Rights After Lessee’s Default

32. (a) In the event the Lessor resumes possession of the apartment, either by summary proceedings, action of ejectment or otherwise because of default by the Lessee in the payment of any rent or additional rent due hereunder, or on the expiration of the term pursuant to a notice given as provided in Paragraph 31 hereof upon the happening of any event specified in subsections – (a) to (f) inclusive or (j) of Paragraph 31, Lessee shall continue to remain liable for payment of a sum equal to the rent which would have become due hereunder and shall pay the same in installments at the time such rent would be due hereunder. No suit brought to recover any such rent or additional rent shall prejudice the right of the Lessor to recover any subsequent installment. After resuming possession, the Lessor may, at its option, from time to time (i) relet the apartment for its own account, or (ii) relet the apartment as the agent of the lessee, in the name of the Lessee or in its own name, for a term or term which may  be less than or greater than the period which would otherwise have constituted the balance of the term of this lease, and may grant concessions or free rent, in its discretion. Any reletting of the apartment shall be deemed for the account of the Lessee, unless within ten days after such reletting the Lessor shall notify the own account. The fact that the Lessor may have relet the apartment as agent for the Lessee shall not prevent the Lessor from thereafter notifying the Lessee that or proposes to relet the apartment for its own account. If the Lessor relets the apartment as agent for the lessee, it shall after reimbursing itself for its expenses in connection therewith, including, leasing commission and reasonable amount for attorneys’ fees and expenses, and decoration, alterations and repairs in and to the apartment, apply the remaining avails of such reletting against the Lessee’s continuing obligations hereunder. There shall be a final accounting between the lessor and the lessee upon the earliest of the following four dates: (A) the date of expiration of the term of this lease as stated on page 1 hereof; (B) the date as of which a new proprietary lease covering the apartment shall have become effective; (C) the date the Lessor written notice to the lessee that it has relet the apartment for its own account; (D) the date upon which all proprietary leases of the Lessor  terminated. From and after the date upon which the Lessor becomes obligated to account to the Lessee, as above provided, the Lessor shall have no further duty to account to the Lessee for any avails of reletting and the Lessee shall have no further liability for sums thereafter accruing hereunder, but such termination of the Lessee’s liability shall not affect any liabilities theretofore accrued.

Collection of Rent from Subtenants

(b) if the Lessee shall at any time sublet the apartment and shall default in the payment of any rent or additional rent, the Lessor may, at its option, so long as such default shall continue, demand and receive from the subtenant the rent due or becoming due from such subtenant to the Lessee, and apply the amount to pay sums due and to become due from the Lessee to the Lessor. Any payment by a subtenant to the Lessor shall constitute a discharge of the obligation of such subtenant to the lessee to the extent of the amount so paid. The acceptance of rent from any subtenant shall not be deemed a consent to or approval of any subletting or assignment by the Lessee, or a release or discharge of any of the obligations of the Lessee hereunder.

Sales of Shares

(c) upon the termination of this lease under the provisions of subdivision (a) to (f) inclusive or (j) of Paragraph 31, the Lessee shall surrender to the corporation the certificate for the shares of the corporation owned by the Lessee to which this lease is appurtenant. Whether or not said certificates is surrendered, the Lessor may issue a new proprietary lease of the apartment and issue a new certificate for the shares of the Lessor owned by the Lessee and allocated to the apartment when a purchaser therefor is obtained, provided the issuance of such shares and such lease to such purchaser is authorized by a resolution of the Directors , or by writing signed by a majority of the Directors or by lessees owning, or record at least majority of the shares of the Lessor accompanying proprietary leases then in force. Upon such issuance the certificate owned or held by the lessee shall be automatically cancelled and rendered null and void. The lessor shall apply the proceeds received for the issuance of such shares first, towards the payment of lessee’s indebtedness hereunder (including interest, attorneys’ fee and other expenses incurred by the Lessor); second, if said termination shall result pursuant to subdivision (j) of  Paragraph 31 by reason of the default under the Security Agreement towards the payment of Lessee’s indebtedness  under the Security Agreement (including all costs, expense and charges payable by Lessee thereunder); and, third, if the proceeds are sufficient to pay the foregoing, the Lessor shall pay over any surplus to the Lessee, but if insufficient the lessee shall remain liable for the balance of the indebtedness due hereunder and (if applicable) under said Security Agreement. Upon the issuance of any such new proprietary lease and certificate, the lessee shall only be liable for rent and expenses accrued to that time. The Lessor shall not, however, be obligated to sell such shares and appurtenant lease or otherwise make any attempt to mitigate damages.

Waiver of Right of Redemption

33. The Lessee hereby expressly waives any and all right of redemptions in case the Lessee shall be dispossessed by judgement or warrant of any courts or judge. The words “enter,” and “re-entry” as used in this lease are not restricted to their technical legal meaning.

Surrender of Possession

34. Upon the termination of this lessee under provision of subdivisions (a) to (f) inclusive or (j) of Paragraph 31, the lessee shall remain liable as provided in Paragraph 32 of this lease. Upon termination of this lease under any other of its provisions, the lessee shall be and remain liable to pay all rent, additional rent and other charges due or accrued and to perform all covenants and agreements of the Lessee up to the date of such termination. On or before any such termination the lessee shall vacate the apartment and surrender possession thereof to the lessor or its demand of the lessor or its assigns, shall execute, acknowledge and deliver to the lessor or its assigns any instruments which may reasonably be required to evidence the surrendering of all estate and interest of the Lessee in the apartment or in the building of which it is a part.

Lessee’s Options to Cancel

35. (a) This lease may be cancelled by the lessee on any September 30th after the third anniversary of the consummation of the plan of cooperative organization pursuant to which proprietary leases were originally issued upon complying with all the provisions here in after set forth. Irrevocable written notice of intention to cancel must be given by the lessee to the lessor on or before April 1 in the calendar year with such cancellation is to occur. At the time of the giving of such notice of intention to cancel there must be deposited with the lessor by the Lessee.

Deposits Required

(1) the Lessee’s counterpart of this lease with a written assignment in form required by the Lessor, in black, effective as of August 31 or the year of cancellation, free from all subleases, tenancies, liens, encumbrances, pledges, security interest and other charges whatsoever (except right of occupancy of third parties existing on the date the lessor acquires title of the building);

(2) the Lessee’s certificates for his shares of the Lessor, endorsed in black for transfer and with all necessary transfer tax stamps affixed or with payment of any transfer taxes due thereon;

(3) a written statement setting forth in detail those addition, improvements, fixtures or equipment which the lessee has under the terms of this lease the right to and intends to remove.

Removal of Fixtures; Possession

(b) all additions, improvements , appliances and fixtures which are removable under the terms of this lease and which are enumerated in the statement made as provided in subdivision (3) above shall be removed by the Lessee prior August 31st the lessee shall deliver possession of the apartment to the Lessor in good condition with all required equipment, fixtures and appliances installed and in proper operating condition and free from all subleases and tenancies, liens, encumbrances, pledge, security interests and other charges which shall be payable under this lease up to and including the following September 30th.

Permission to show and Occupy Premises

(c) the Lessor and its agents say show the apartment to prospective lessees, contractors and architects and architects at reasonable time after notice of the Lessee’s intentions to cancel. After August 31st or the earlier vacating of the apartment, the Lessor and its agents, employees and lessees may enter the apartment, occupy the same and make such alterations and additions therein as the lessor may deem the rent due hereunder.

Effective Date of Cancellation

(d) if the Lessee is not otherwise in default hereunder and if the lessee shall have complied with all of the provisions of subdivisions (a) and (b) hereof, the this lease shall be cancelled and all rights, duties and obligations of the parties  hereunder shall cease as of the September 30th fixed in said notice, and the shares of Lessor shall become the absolute property of the lessor, provided, however that the lessee shall not be released from any indebtedness owing to the Lessor on said last mentioned date.

Rights on Lessee’s Default

(e) if the lessee shall give the notice but fail to comply with all of the other provisions of this paragraph, the Lessor shall have option at any time prior to September 30th (i) of returning to the lessee this lease, the certificate for shares and other documents deposited, and thereupon the Lessee shall deemed to have withdrawn the notice of intention to cancel this lease, or (ii) treating this lease as cancelled as of the September 30th named in the notice of intentions to cancel as the date for the cancellation of such lease, and bringing such proceedings and actions as it may deem best to enforce the covenants of the lessee the herein above contained and to collect from the lessee the payments which the Lessee is required to make hereunder, together with reasonable attorneys’ fees and expenses.

Extension of Options to cancel

36. (a) If on April 1st in any year the total number of shares owned by lessees holding proprietary leases who have given notice pursuant to Paragraph 35 of intention to cancel such proprietary leases on September 30th of said year shall aggregate the percent (10%) or more of the Lessor’s outstanding shares, exclusive of the treasury shares, then the Lessor shall, prior to April 30th in such year, give a written notice to the holders of all issued shares of the lessor stating the total number shares owned by lessees of intention to cancel. In such case the proprietary lessees to whom such notice shall have been given shall have the right to cancel their leases in compliance with the provisions of Paragraph 35 hereof, provided only that written notice of the intention to cancel such leases shall be given on or before the following July 1st instead of the preceding April 1st.

Right of Lessees to Cancel

(b) If lessees owning at least 80% of the then issued and outstanding shares of the Lessor shall exercise the options to cancel their leases in one year, then this and all other proprietary leases shall thereupon terminate on the September 30th of the year in which such options shall have been exercised, as though every lessee had exercised such option. In such event none of the lessees shall be required to surrender his shares to the lessor and all certificates for shares delivered to the lessor by those who had, during that year, served notice of intention to cancel their leases under the provisions hereof, shall be returned to such lessees.

Continuance of Cooperative Management of Building after all Leases Terminated

37. No later than thirty days after the termination of all proprietary leases, whether by expiration of their terms or otherwise, a special meeting of shareholders of the Lessor shall take place to determine whether (a) to continue to operate the building as a residential apartment building, (b) to alter demolish or rebuild the building and liquidate the assets of the Lessor, and the Directors shall carry out the determination made at said meeting of shareholders of the Lessor , and all of the holders of the issued and outstanding shares of the Lessor shall have such rights as ensure to shareholders of corporation having title to real estate.

Unsold Shares

38. (a) The term “Unsold Shares” means and has exclusive reference to the shares of the Lessor which were issued to the Lessor’s grantor(s) or individual(s) produced by the Lessor’s grantor(s) pursuant to the plan of cooperative organization of Lessor; and each block of such shares shall continue to retain their character as Unsold Shares only until (1) they become the property of a purchaser for bona fide occupancy (by himself or a member of his family) of the apartment to which such shares are allocated, (2) the holders of such block of shares (or a member of his family) becomes a bona fide occupant of the apartment to which they are allocated or (3) the transferor, in connection with his assignment thereof, does not designate the transferee as a holder of Unsold Shares. The term “holder of Unsold Shares” wherever used herein shall include a “purchaser of Unsold Shares”, such terms being used interchangeably in this lease.

Subletting Apartment and Sales of Shares

(b) Neither the subletting of the apartment nor the assignment of this lease, by the lessee who is the holder of the block of Unsold Shares allocated thereto, or any Lessee who has not purchased for his personal occupancy or that of any member of his family shall require the consent of the Directors or shareholders, as provided in Paragraph 15 and 16, nor shall Lessor make any charge of any kind in connections therewith.

Change in Forms of Lease

(c) Without the consent of the Lessee, no change in the form, terms or conditions of this proprietary lease, as permitted by Paragraph 6, shall (1) affect the rights of the Lessee who is the holder of the Unsold Shares accompanying this lease to sublet the apartment or to assign this lease, as provided in this paragraph, or (2) eliminate or modify any rights, privileges or obligations of such Lessee.

Restriction on Cancellation

(d) The provisions of Paragraph 35 may not be availed of by a Lessee who is the holder of the block of Unsold Shares accompanying this lease unless (i) lessees owning a majority of Lessor’s outstanding shares shall have given notice of intentions to cancel pursuant to Paragraph 35 or 36 or (ii) all Unsold Shares constitute 15 or less of Lessor’s outstanding shares, at least five (5) years shall have paid to lessor a sum equal to product of the current monthly rent (maintenance charge) payable under this lease multiplied by 24.

Foreclosure – Receiver of Rents

39. Notwithstanding anything contained in this lease, if any action shall be instituted to foreclosure any mortgage on the land or the building or the leasehold of the land or building, the Lessee shall, on demand , pay to the receiver of the rents appointed in such actions rent, if any , owning hereunder on the date of such appointment and shall pay thereafter to such receiver in advance, on the first day of each month during the pendency of such action, as rent hereunder , the rent for the apartment as last determined and established by the Directors prior to the commencement of said action, and such rent shall be paid during the period of such receivership, whether or not the director shall have determined and establishing the rent payable hereunder for any part of the period during which such receivership may continue. The provisions of this Paragraph are intended for the building or the leasehold of the land or building and may not be modified or annulled without the prior written consent of any such mortgage holder.

To Whom Covenants Apply

40. The references herein to the Lessee or to a shareholder of the Lessor shall be deemed to include the executors, administrators, legal representative, legatees, distributes and assign of the Lessee or of such shareholder; and covenants herein contained shall apply to, bind and ensure to the benefits of the Lessor and its successors and assign, and the Lessee and the executors, administrators, legal representative, legatees, distributes, successors and assign of the Lessee, expect as hereinabove stated.

Waiver of Trial by Jury

41. To the extent permitted by law, the respective parties hereto shall and they hereby do waive trial by jury in any actions, proceeding or counterclaim brought by either of the parties hereto against the other on any matters lease, the Lessee’s use or occupancy of the apartment, or any claim of damage resulting from any act or omission of the parties in any way connected with this lease or the apartment.

Lessor’s Additional Remedies

42. In the event of a breach or threatened breach by Lessee of any provision hereof, the lessor shall have the right of injunctions and the right to invoke any remedy at law or in equity, as if re-entry, summary proceedings and other remedies were not here in provided for, and the election of one or more remedies shall not preclude the Lessor from any other remedy.

Lessee More Than One Person

43. If more than one person is named as Lessee hereunder, the Lessor may require the signatures of all such persons in connection with any notice to be given or action to be taken by the Lessee hereunder, including, without limiting the generality of the foregoing, the surrender or assignment of this leave, or any request for consent to assignment or subletting. Each person named as Lessee shall be jointly and severally liable for all of the Lessee’s obligation hereunder. Any notice by the Lessor to any person named as Lessee shall be sufficient, and shall have the same force and effect as though given to all persons named as Lessee.

Effect of Partial Invalidity

44. If any clause or provision herein contained shall be adjudged invalid, the same shall not affect the validity of any other clause or provision of this lease, or constitute any cause of action in favor of either party as against the other; and such clause shall be deemed deleted, limited, expanded or otherwise modified or conditioned to the extent necessary to render it valid.

Notice to Lessor of Default

45. The Lessee may not institute an action or proceeding against the Lessor or defend , or assert counterclaim in any action by the Lessor related to the Lessee’s failure to pay rent , if such action, defense or counterclaim is based upon the Lessor’s failure to comply with its obligations under this lease or any law, ordinance or governmental regulations unless such failures shall have continued for at least thirty days before such action or proceeding was commenced and the giving of written notice thereof by the Lessee to the Lessor.

Unity of Shares and Lease

46. The shares of the Lessor held by the Lessee and allocated to the apartment have been acquired and are owned subjects to the following conditions agreed upon with the Lessor and with each of the other proprietary lessees for their mutual benefits:

(a) the shares represented by each certificate are transferable only as an entirety and only in connection with a simultaneous transfer of this lease, unless transferred pursuant to Article V Section 4 of the By-laws of the Lessor in connection with the regrouping of space in one or more apartments.

(b) the shares shall not be sold or transferred except to the Lessor or to an assign of this lease after compliance with all of the provisions of this lease relating to assignments

Charges for Gas and Electricity

47. If at any time or times during the terms of this lease the consumption of gas or electricity, or both, in the apartment is measured by a meter which also measures consumption outside the apartment, the Lessor may determine from time to time by resolution of the Board of Directors thereof, the charges, if any, to paid by the Lessee on account of such consumption of gas or electricity or both and any such charges shall payable monthly in advance or in such payments or installments as shall be required by the Directors as shall be provided in such resolution.

Such charges may be determined in the proportions that the number of shares of Lessor allocated to the apartment bears to all shares of Lessor then issued and outstanding, or in the approximate proportion that the floor area of the apartment bears to all floor areas measured by such meter, or such other equitable method as may be determined by the Directors.

No Discrimination

48. The Lessor will not discriminate against any person because of his race, creed, religion, color, national origin, ancestry, sex or other ground prescribed by law when exercising any right reserved to it in this lease.

Marginal Headings

49. The marginal headings of the several paragraphs of this lease shall not be deemed a part of this lease.

Changes to Be in Writing

50. The provisions of this lease cannot be changed orally.

Certain Limitations on Lessor’s Right to Increase Cash Requirements

51. Supplementing and modifying Paragraph 1(c) above, so long as the Unsold Shares constitute 25 or more of the outstanding shares of the Lessor, the Lessor shall not take any of the following actions within three years after the Closing Date unless Lessees owning at least 75 of the shares of the Lessor approve same in writing or by vote, in person or by proxy, at duly constituted meeting called for such purpose:

(i) increase the number or change the type of employees from that described in the aforesaid plan in the footnotes to the schedule of projected receipts and expenses for First Year of Cooperative Operation;

(ii) provide for new additional services from those indicated in the aforesaid Plan in the footnotes to the schedule of projected receipts and expenses for first year of Cooperative Operation, unless the annual cost of such new or additional Services, when added to the annual cost of all other services being provided is no greater than those provided in said footnotes, or

(iii) undertake any small or major improvement or addition, unless required by Law.

(iv) accumulate reserves in any calendar year in excess of 3% of the actual operating expenses of the apartment corporation for its preceding calendar year or $30,500, whichever is greater and for any period less than a full calendar year, the amount of reserves that may be accumulate shall be proportionately reduced.

Incorporation of Plan to convert to Cooperative Ownership

52. This lease incorporates by reference, as if the same were set forth herein at length, all the terms of Lessor’s Plan to convert to cooperative ownership, filed with the Department of Law of the State of New York in accordance with the provisions of Section 352-e of the General Business Law of the State of New York, as amended prior to the date of this lease, pursuant to which the Lessor was organized and acquired the building but nothing herein shall create any obligations on the part of the Lessor or any present or previous shareholder of the Lessor.

Limitation on Obtaining Possession of Apartments

53. If the Plan to Convert to Cooperative Ownership pursuant to which the Lessor was organizes and acquired the building was declared effective as a non-eviction plan, neither the Lessee nor any subsequent holder of the shares allocated to the apartment by means of a proceeding under Sections 54a or 54b of the Re Stabilization Code or any other similar provision of law.

IN WITNESS WHEREOF, the parties have executed this lease as of the date above written.

STATE OF NEW YORK COUNTRY OF NEW YORK

On the day of ________, in the year 19, before me personally appeared by me duly sworn, did depose and say that () he is the (________) of the NEW YORK COOPERATIVE CORPORATION. The corporation described in and which executed the foregoing instruments, that he knows the seal of said corporation; that the seal affixed to said instrument in such corporate seal; that it was affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like orders.

On the day of ______, in the year 19’__, before me personally appeared to me personally known and known to me to be the individual described in and who executed the foregoing instrument, and duly acknowledged to me that (s) he executed the same.

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14 thoughts on “What Is a Proprietary Lease for a Coop Apartment?”

Here is another sample proprietary lease I came across. Do you know if co-ops use pretty much the same language for their proprietary leases, or does it vary greatly by building?

PROPRIETARY LEASE, made as of____________,20_____, by and between 111 FIFTH AVENUE OWNERS CORP., a New York corporation, having an office c/o Co-op Management Corporation, 121 East 13th Street, Floor 5, Brooklyn, New York, (hereinafter called the “Lessor”), and________________, residing at 111 Fifth Avenue, Apt.____, Brooklyn, New York, (hereinafter called the “Lessee”).

WHEREAS, the Lessor is the owner of the land and the building erected thereon in the Country of Kings, State of New York known as and by the street number 111 Fifth Avenue, Brooklyn, New York (hereinafter called the “building”); and

WHEREAS, the Lessee is the owner________________shares of the Lessor, to which this lease is appurtenant and which have been allocated to Apartment__________________in the building;

DEMISED PREMISES: TERM

NOW, THEREFORE, in consideration of the premises, the Lessor hereby leases to the Lessee, and the Lessee hires from the Lessor, subject to the terms and conditions hereof, Apartment in the building (hereinafter referred to as the apartment) for a term from__________, 2008 until December 1, 2086 (unless sooner terminated as hereafter provided). The Corporation’s board of directors may further extend the lease upon a majority vote of all members present at a duly called board meeting. (Amendment unanimously approved at a shareholders meeting held on June 14, 2007.) As used herein “the apartment” means the rooms in the building as partitioned on the date of the execution of this lease designated by the above-stated apartment number, together with their appurtenances and fixtures and any closests, terraces, balconies, roof, or

RENT (MAINTENANCE) HOW FIXED

(a) The rent (sometimes called maintenance) payable by the Lessee for each year, or portion of a, year, during the lease term shall be equal to a proportion of the Lessor’s cash requirements for such year which is the number of shares issued to Lessee divided by the number of shares issued and outstanding by Lessor on the date Lessor’s cash requirements are determined. Such maintenance shall be payable in equal monthly installments in advance on the first day of each month, unless the Board of Directors of the Lessor (hereinafter called the “Directors”) at the time of its determination of the cash requirements shall otherwise direct. Lessee shall also pay Lessee’s pro rata share (determined in the same manner as maintenance) of any special assessment that maybe Levied by Lessor from time to time to pay for any repair, alteration or improvement to the corporate property, or any deficit from operations for a period, or other cash requirements. Such special assessment shall be collected in the same manner as rent, designated as capital, placed in a segregated account and shall be payable in a lump sum or in periodic installments, as the Directors shall determine. The Lessee shall also pay such special assessments as may be provided for herein when due.

Accompanying Shares to be Specified in Proprietary Leases (b) In every proprietary lease herefore executed by the Lessor there has been specified, and in every proprietary lease herefore executed by it there will be specified the number of shares of the lessor issued to a lessee simultaneously therewith, which number, in relation to the total number of shares of the Lessor issued and outstanding, shall constitute the basis for fixing, as hereinbefore provided, the proportionate share of the Lessor’s cash requirements which shall be payable as rent by the Lessee.

Cash Requirements Defined (c) “Cash requirements” whenever used herein shall mean the estimated amount in cash which the Directors shall from time to time in its judgment determine to be necessary or proper for (1) the operation, maintenance, care, alteration and improvement of the corporate property during the year or portion of the year for which such determination is made; (2) the creation of such reserve for contingencies, repairs, replacements and general operation as it may deem proper; and (3) the payment of any obligations, liabilities or expenses incurred or to be incurred, after giving consideration to (i) income expected to be received during such period (other than rent from proprietary lessees), and (ii) cash on hand which the Directors in its discretion may choose to apply. The Directors may from time to time modify its prior determination and increase or diminish the amount previously determined as cash requirements of the corporation for a year or portion thereof, No determination of cash requirements shall have any retroactive effect on the amount of the rent payable by the Lessee for any period to the date of such determination. All determinations of cash requirements shall be conclusive to all lessees.

Authority Limited to Board of Directors (d) Whenever in this paragraph or any other paragraph of this lease, a power or privilege is given to the Directors, the same may be exercised only by the Directors, and in no event may any such power or privilege be exercised by a creditor, creditor, receiver or trustee.

Issuance of Additional Shares (e) If the Lessor shall hereafter issues shares (whether now or hereafter authorized) in addition to those issued on the date of the execution of this lease, the holders of the shares hereafter issued shall be obligated to pay rent at the same rate as the other proprietary lessees from and after the date of issuance. If any such shares be issued on a date other than the first or last day of the month, the rent for the month in which issued shall be apportioned. The cash requirements as last determined shall, upon the issuance of such shares, be deemed increased by an amount equal to such rent.

Paid-in Surplus (f) The Directors may from time to time as may be proper determine how much of the maintenance and other receipts, when received, shall be created on the corporate accounts to “Paid-in-Surplus” (but not more than such failure

Failure to Fix Cash Requirements (g) The failure of the Directors to determine the Lessor’s cash requirements for any year or portion thereof shall not be deemed a waiver or modification in any respect of the covenants and provisions hereof, or a release of the Lessee from the obligations to pay the maintenance or any installment thereof, but the maintenance computed on the basis of the cash requirements as last determined for any year or portion thereof shall thereafter continue to be the maintenance until a new determination of cash requirements shall be made.

LESSOR’S REPAIRS 2. The Lessor shall at its expense keep in good repair all of the building including all of the apartments, the sidewalks and courts surrounding the same, and its equipment and apparatus except those portions which are expressly stated to be the responsibility of the Lessee pursuant to Paragraph 18 hereof.

SERVICES BY LESSOR 3. The Lessor shall maintain and manage the building as an apartment building, and shall keep the public halls, cellars and stairways clean and properly lighted and heated, and shall provide the number of attendants requisite, in the judgment of the Directors, for the proper care and service of the building, and shall provide the apartment with a proper and sufficient supply of hot and cold water and of heart and if there be central air conditioning equipment supplied by the Lessor, air conditioning when deemed appropriate by the Directors. The covenants by the Lessor herein contained are subject, however, to the discretionary power of the Directors to determine from time to time what services and what attendants shall be proper and the manner of maintaining and operating the building, and also what existing, services, shall be increased, reduced, changed, modified or terminated.

DAMAGE TO APARTMENT OR BUILDING 4. (a) If the apartment or the means of access thereto or the building shall be damaged by fire or other cause by multi-peril policies commonly carried by cooperative corporations in New York City (any other damage to be repaired by Lessor or Lessee pursuant to Paragraph 2 and 18, as the case may be), the Lessor shall at its own cost and expense, with reasonable dispatch after receipt of notice of damage, repair or replace or cause to be repaired or replaced, with materials of a kind and quality then customary in building similar to the building, the apartment, and the means of access thereto, including the walls, floors, ceilings, pipes, wiring and conduits in the apartment. Anything in this Paragraph or Paragraph 2 to the contrary notwithstanding, Lessor shall not be required to repair or replace, or cause to be repaired or replaced, equipment, fixtures, furniture, furnishings or decorations installed by the Lessee or any of his predecessors in title nor shall the Lessor be obligated to repaint or replace wallpaper or other decorations in the apartment or to refinish floors located therein.

Rent Abatement (b) In the event that the damage resulting from fire or other cause shall so extensive as to render the apartment partly or wholly untenantable, or if the means of access thereto shall be destroyed, the rent hereunder shall proportionately abate until the apartment shall again be rendered wholly tenantable or the means of access restored; but if the damage shall be caused by the act or negligence of the Lessee or the agents, employees, guests or members of the family of the Lessee or any occupant of the apartment, such rental shall abate only to the extent of the rental value insurance, if any, collected by Lessee with respect to the apartment.

Expiration of Lease Due to Damage (c) If the Directors shall determine that (i) the building is totally destroyed by the fire or other cause, or (ii) the building is so damaged that it cannot be repaired within a reasonable time after the loss shall have been adjusted with the insurance carriers, or (iii) the destruction or damage was caused by hazards which are not covered under the Lessor’s insurance policies then in effect, and if in any such case the record holders of at least two-thirds of the issued shares at a shareholder’s meeting duly called for that purpose held within 120 days after the determination by the Directors, shall vote not to repair, restore or rebuild, then upon the giving of notice pursuant to Paragraph 31 hereof, this Lease and all other proprietary leases and all right, title and interest of the parties thereunder and the tenancies thereby created, shall thereupon wholly cease and expire and rent shall be paid to the date of such destruction or damage. The Lessee hereby waives any and all rights under Section 227 of the Real Property Law and in no event shall the Lessee have any option or right to terminate this Lease, except as provided herein.

Waiver of Subrogation (d) Lessor agrees to use its best efforts to obtain a provision in all insurance policies carried by it waiving the right of subrogation against the Lessee; and, to the extent that any loss or damage is covered by the Lessor by any insurance policies which contain such waiver of subrogation, the Lessor releases the Lessee from any liability with respect to such loss or damage. In the event that Lessee suffers loss or damage for which Lessor would be liable be liable, and Lessee carries insurance which covers such loss or damage and the insurance policy or policies contain a waiver of subrogation against the Lessor, then in that event Lessee releases Lessor from any liability with respect to the loss or damage.

INSPECTION OF BOOKS OF ACCOUNT, ANNUAL REPORT 5. The Lessor shall keep full and correct books of account ata its principal office or at such other place as the Directors may from time to time determine, and the same shall be open during all reasonable hours to inspection by the Lessee or a representative of the Lessee. The Lessor shall deliver to the Lessee within a reasonable time after the end of each fiscal year an annual report of corporate financial affairs, including a balance sheet and a statement of income and expenses, certified by an independent certified public accountant.

CHANGES IN TERMS AND CONDITIONS OF PROPRIETARY LEASES 6. Each proprietary lease shall be in the form of this lease, unless a variation of any lease is authorized by lessees owning at least two-thirds of the Lessor’s shares then issued and executed by the Lessor and lessee affected. The form and provisions of all the proprietary leases then in effect and thereafter to be executed may be changed by the approval of lessees owning at least sixty-six and two-thirds percent (66-2/3%) of the Lessor’s shares then issued, and such changes shall be binding on all lessees even if they did not vote for such changes except that the proportionate share of rent or cash requirements payable by any lessee may not be increased nor may his right to cancel the proprietary lease under the conditions set forth in Paragraph 35 be eliminated or impaired without his express consent. Approval by lessees as provided for herein shall be evidenced by written consent or by affirmative vote taken at a meeting called for such purpose. Notwithstanding the foregoing, in no event shall any change in the form of proprietary lease and any of the provisions thereof be made which shall adversely affect certain rights granted to (i) purchasers of Unsold Shares (pursuant to Paragraph 38 hereof) or (ii) the Secured Party (its successors or assigns) as set forth in Paragraph 17(b) below, unless all such purchasers of Unsold Shares and the Secured Party affected thereby shall have unanimously agreed to each such change.

PENTHOUSE, TERRACES AND BALCONIES 7. If the apartment includes a terrace, balcony, or a portion of the roof adjoining a penthouse, the Lessee shall have and enjoy the exclusive use of the terrace or balcony or that portion of the roof appurtenant to the penthouse, subject to the applicable provisions of this lease and to the use of the terrace, balcony or roof by the Lessor to the extent herein permitted. The Lessee’s use thereof shall be subject to such regulations as may, from time to time, be prescribed by the Directors. The Lessor shall have the right to erect equipment on the roof, including radio and television aerials and antennas, for its use and the use of the lessees in the building and shall have the right of access thereto for such installations and for the repair thereof. The Lessee shall keep the terrace, balcony, or portion of the roof appurtenant to his apartment clean and free from snow, ice, leaves and other debris and shall maintain all screens and drain boxes in good condition. No planting, fences, structures or lattices shall be erected or installed on the terraces, balconies, or roof of the building without the prior written approval of the building, nor shall the walls thereof be painted by the Lessee without erected by the Lessor or his predecessor in interest may be removed and restored by the Lessor at the expense of the Lessee for the purpose of repairs, upkeep or maintenance of the building.

ASSIGNMENT OF LESSOR’S RIGHTS AGAINST OCCUPANT 8. If at the date of the commencement of this Lease, any third party shall be in possession or have the right to possession of the apartment, then the Lessor hereby assigns to the Lessee all of the Lessor’s rights against the third party from and after the date of the commencement of the term hereof, and the Lessee by the execution hereof assumes all of the Lessor’s obligations to the third party from that date. The Lessor agrees to cooperate with the Lessee, at the Lessee’s sole cost and expense, in the enforcement of the Lessee’s rights against the third party.

CANCELLATION OF PRIOR AGREEMENTS 9. If at the date of the commencement of this Lease, the Lessee has the right to possession of the apartment under any agreement or statutory tenancy, this Lease shall supersede such agreement or statutory tenancy which shall be of no further after the date of commencement of this Lease, except for claims theretofore arising thereunder.

QUIET ENJOYMENT 10. The Lessee, upon paying the rent and performing the covenants and complying with the conditions on the part of the Lessee to be performed as herein set forth, shall, at all times during the term hereby granted, quietly have, hold and enjoy the apartment without any let, suit, trouble or hindrance from the Lessor, subject, however to the rights of present tenants or occupants of the apartment, and subject to any and all mortgages and underlying Leases of the land and the building, as provided in Paragraph 22 below.

INDEMNITY 11. The Lessee agrees to save the Lessor harmless from all liability, loss, damage and expense arising from injury to person or property occasioned by the failure of the Lessee to comply with any provision hereof, or due wholly or in part to any act, default or omission of the Lessee or of any person dwelling or visiting the apartment, or by the Lessor, its agents, servants or contractors when acting as agent for the Lessee as in this Lease provided. This paragraph shall not apply to any loss or damage when the Lessor is covered by insurance which provides for waiver of subrogation against the Lessee.

PAYMENT OF RENT 12. The Lessee will pay the rent to the Lessor upon the terms and at the times herein provided, without any deduction on account of any set-off or claim which the Lessee may have against the Lessor, and if the Lessee shall fail to pay any installment of rent by no later than the tenth (10th) day of each month, he shall be required to pay a late charge equal to twenty-five ($25.00) dollars or such amount as the Board of Directors may impose.

HOUSE RULES 13. The Lessor has adopted House Rules which are appended hereto, and the Directors may alter, amend or repeal such House Rules and adopt new House Rules. This Lease shall be in all respects subject to such House rules which, when a copy thereof has been furnished to the Lessee, shall be taken to be part hereof, and the Lessee hereby covenants to comply with all such House Rules and see that they are faithfully observed by the family, guests, employees and subtenants of the Lessee. Breach of a House Rule shall be a default under this Lease. The Lessor shall not be responsible to the Lessee for the nonobservance or violation of House Rules by any other lessee or person.

USE OF PREMISES 14. The Lessee shall not, without the written consent of the Lessor on such conditions as Lessor may prescribed, occupy or use the apartment or permit the same or any part thereof to be occupied or used for any purpose other than as a private dwelling for the Lessee and Lessee’s spouse, their children, grandchildren, parents, grandparents, brothers and sisters and domestic employees, and in no event shall more than one married couple occupy the apartment without the written consent of the Lessor. In addition to the foregoing, the apartment may be occupied from the time by guests of the Lessee for a period of a time not exceeding one month, unless a longer period is approved in writing by the Lessor, but no guests may occupy the apartment unless one or more of the permitted adult residents are then in occupancy or unless consented to in writing by the Lessor. Notwithstanding the foregoing, (a) Lessee may use the apartment for any home occupation or use permitted under applicable zoning law, building code or other rules and regulations of governmental authorities having jurisdiction and (b) the Lessee who is a holder of a block of Unsold Shares (defined in Paragraph 38 below) shall have the right to use the apartment as a model or an office (or both) in connection with the sale and rental of apartments to which the Unsold Shares are allocated.

SUBLETTING 15. Except as provided in Paragraph 17(b) and 38 of this Lease, the Lessee shall not sublet the whole or any part of the apartment or renew or extend any previously authorized sublease, unless consent shall have been duly authorized by a resolution of the Directors, or given in writing by a majority of the Directors or, if the Directors shall have failed or refused to give such consent, then by lessees owning at least sixty-five percent (65%) of the then issued shares of the Lessor. Consent by lessees as provided for herein shall be evidenced by written consent or by affirmative vote taken at a meeting called for such purpose. Any consent to subletting may be subject to such conditions as the Directors or lessees, as the case may be, may impose. There shall be no limitation on the right of Directors or lessees to grant or withhold consent, for any reason or for no reason to a subletting. No consent to a subletting shall operate to release the Lessee from any obligation hereunder.

ASSIGNMENT 16. (a) The Lessee shall not assign this Lease or transfer the shares to which it is appurtenant or any interest therein, and no such assignment or transfer shall take effect as against the Lessor for any purpose, until

(i) An instrument of assignment in form approved by Lessor executed and acknowledged by the assignor shall be delivered to the Lessor; and

(ii) An agreement executed and acknowledged by the assignee in form approved by Lessor assuming and agreeing to be bound by all the covenants and conditions of this Lease to be performed or complied with by the Lessee on and after the effective date of the assignment shall have been delivered to the Lessor, or, at the request of the Lessor, the assignee shall have surrendered the assigned Lease and entered into a new Lease in the same form for the remainder of the term, which case the Lessee’s Lease shall be deemed cancelled as of the effective date of the assignment; and

(iii) All shares of the Lessor to which this Lease is appurtenant shall have transferred to the assignee, which property transfer taxes paid and stamps affixed; and

(iv) All sums due from the Lessee shall have been paid to the Lessor, together with a sum to be fixed by the Directors to cover reasonable legal and other expenses of the Lessor and its managing agent in connection with the assignment and transfer of shares (subject to Paragraph 17(b) and 38 hereof); and

(v) A search or certification from a title or abstract company as the Directors ma shall be delivered to Lessor; and

(vi) Except in the case of an assignment, transfer or bequest of the shares and this Lease to the Lessee’s spouse or adult siblings or parents, and except as otherwise provided in Paragraph 17(b) and 38 of this Lease, consent to an assignment shall have been authorized by resolution of the Directors, or given in writing by a majority of the Directors; or, if the Directors shall have failed or refused to give such consent within 30 days after submission of references to them or Lessor’s agent, then by lessees owning of record at least sixty-five percent (65%) of the then issued shares of the Lessor. Consent by lessees as provided for herein shall be evidenced by written consent or by affirmative vote taken at a meeting called for such purpose in the manner as provided in the By-laws.

Consents: On Death of Lease (b) If the Lessee shall die, consent shall not be unreasonably withheld to an assignment of this Lease and shares to a financial responsible member of the Lessee’s family (other than the Lessee’s spouse, adult siblings or parents as to whom no consent is required).

Consents Generally: Stockholders’ and Directors’ Obligation to Consent (c) There shall be no limitation, except as specifically provided above, on the right of Directors or lessees to grant or withhold consent, for any reason or for no reason, to an assignment.

Release of Lessee Upon Assignment (d) If this Lease shall be assigned in compliance herewith, the Lessee-assignor shall have no further liability on any of the covenants of this Lease to be thereafter performed.

Further Assignment or Subletting (e) Regardless of any prior consent heretofore given, neither the Lessee nor his executor, nor administrator, nor any trustee or receiver of the Lessee, nor anyone to whom the interests of the Lessee shall pass by law, shall be entitled further to assign this Lease, or to sublet the apartment, or any part thereof, except upon compliance with the requirements of this Lease.

Statement by Lessor (f) If this Lease is then in force and effect, Lessor will, upon request of Lessee, deliver to the assignee a written statement that this Lease remains on the date thereof in force and effect; but no such statement shall be deemed an admission that there is no default under this Lease.

PLEDGE OF SHARES AND LEASE 17. (a) A pledge of this Lease and the shares to which it is appurtenant shall not be a violation of this Lease; but, except as otherwise provided elsewhere herein, neither the pledgee nor any transferee of the pledged security shall be entitled to have the shares transferred of record on the books of the Lessor, nor to vote such shares, nor to occupy or permit the occupancy by the others of the apartment, nor to sell such shares or this Lease, without first obtaining the consent of the Lessor in accordance with and after complying with all of the provisions of Paragraph 14, 15 or 16, as the case may be. The acceptance by Lessor of payments by the pledgee or any transferee of the pledged security on account of rent or additional rent shall not constitute a waiver of the foregoing provisions.

Secured Party (b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 17 or any other provisions of this Lease to the contrary, the following provisions of this Paragraph shall govern and be binding.

(i) The Lessor agrees that it shall give to any holder of a security interest in the shares of the Lessor specified in the recitals of this Lease or mortgagee of this Lease who so requests (any such holder being hereinafter referred to as a “Secured Party”), a copy of any notice of default which the Lessor gives gives to the Lessee pursuant to the terms of this Lease, and if the Lessee shall fail to correct the default specified in such notice within the time and in the manner provided for in this Lease, then the Secured Party shall have an additional period of time, equal to the time originally given to the Lessee, to cure the default for the account of the Lessee or to cause same to be cured, and the Lessor will not act upon the default unless and until the time in which the Secured Party may cure the default or cause same to be cured as provided above, shall have elapsed, and the default shall not have been cured.

(ii) If this Lease is terminated by the Lessor as provided in Paragraph 31 or 35 of this Lease, or by agreement with the Lessee, (1) the Lessor promptly shall give notice of such termination to the Secured Party made within thirty (30) days of the giving of such notice, the Lessor (i) shall commence and prosecute a summary dispossess proceeding to obtain possession of the apartment, and (ii) shall, within sixty (60) days of its receipt of the foregoing request by the Secured Party, reissue the aforementioned shares to, and (with respect to any termination other than under Paragraph 36 below) shall enter into a new proprietary Lease for the apartment with the Secured Party, or any individual designated by the Secured Party, or the individual nominee of the individual so designated by the Secured Party, all without the consent of the Directors or the shareholders to which reference is made in Paragraph 16(a) and 32(c) but with the consent only of the Lessor’s then managing agent which shall not be unreasonably withheld or delayed, provided, however, that the Lessor shall have received payment, on behalf of the Lessee, of all rent, additional rent and other sums owed by the Lessee to the Lessor under this Lease for the period ending on the date of reissuance of the aforementioned shares of the Lessor including, without limitation, sums owed under Paragraphs 32(a) and (c) of this Lease; the Secured Party, or the individual designated by the Secured Party (if and as long as such individual by himself or a member of his family does not actually occupy the apartment) shall have all of the rights provided for in Paragraphs 15, 16, 21, and 38 of this Lease as if he were a holder of Unsold Shares; and accordingly, no surplus shall be payable by the Lessor to the Lessee as otherwise provided in Paragraph 32(c).

(iii) If the purchase by the Lessee of the shares allocated to the apartment was financed by a loan made by the Sponsor, a bank, savings bank or savings and loan association and a default or an event of default shall have occurred under the terms of either or both of the security agreement or leasehold mortgage entered into by the Lessee and the Secured Party, and if (1) notice of the default or event of default shall have been given to the Lessor, (2) and the Secured Party, or individual designated by the Secured Party, shall be entitled to become the owner of the shares and Lessee under this Lease pursuant to the terms of said either or both the security agreement or leasehold mortgage, (3) not less than five days’ written notice of an intended transfer of the shares and this Lease shall have been given to the Lessor and the Lessee, (4) there has been paid, on behalf of the Lessee, all rent, additional rent and other sums owed by the Lessee to the Lessor under this Lease for the period ending on the date of transfer of the aforementioned shares as hereinafter provided, and the (5) the Lessor shall be furnished with such affidavits, certificates, and opinions of counsel, in form and substance reasonably satisfactory to the Lessor, indicating that the foregoing conditions (1) through (4) have been met, then (a) a transfer of the shares and the proprietary Lease shall be made to the Secured Party, or such individual, upon request, and without the consent of the Directors or the shareholders to which reference is made in Paragraph 16(a)(vi) but with the consent only of the Lessor’s then managing agent which shall not be unreasonably withheld or delayed, and (b) the individual to whom such transfer is made ( if and as long as such individual [by himself or a member of his family] does not actually occupy the apartment) shall have all of the rights provided for in Paragraphs 15, 16, 21, and 38 of this Lease as if he were a holder of Unsold Shares.

(iv) Without the prior written consent of any Secured Party who has requested a copy of any notice of default as herein before provided in subparagraph (b) of this Paragraph 17, (a) the Lessor and the Lessee will not enter into any agreement modifying or cancelling this Lease (b) no change in the forms, terms or conditions of this Lease, as permitted by Paragraph 6, shall eliminate or modify any rights, privileges or obligations of a Secured Party as set forth in this Paragraph 17, (c) the Lessor will not terminate or accept a surrender of this Lease, except as provided in Paragraphs 31 or 35 Of this Lease and in subparagraph (b) (ii) of this Paragraph 17 (d) the Lessee not assign this Lease or sublet the apartment, (e) any modification, cancellation, surrender, termination or assignment Of this Lease or any sublease of the apartment not made in accordance with the provisions hereof shall be void and of no effect, (f) the Lessor will not consent to any further mortgage on this Lease or security interest created in the shares, (g) the Lessee will not make any further mortgage or create any further security interest in the shares or this Lease, and (h) any such further mortgage or security interest shall be void and of no effect.

(v) The Secured Party or any designee of a Secured Party to whom a transfer of this Lease shall have been made pursuant to the terms of this subparagraph (b) hereof may cancel this Lease under the terms of Paragraph 35 hereof; except that the Secured Party or such designee (a) may cancel this Lease at any time after the Secured Party or the designee acquires this Lease and the shares appurtenant hereto due to foreclosure of the security agreement-Leasehold mortgage; (b) need give only thirty (30) days’ notice of its intention to cancel; and (c) may give such notice at any time during the calendar year.

(vi) A Secured Party claiming or exercising any of the rights and privileges granted it pursuant to the provisions of this subparagraph (b) shall be deemed to have agreed to indemnify Lessor for all loss, liability or expense (including reasonable attorneys’ fees) arising out of claims by Lessee, or his successors or assigns, against Lessor or the Secured Party, or their respective successors or assigns for acts of omissions to act on the part of either Lessor or Secured Party, or their respective successors or assigns, pursuant to this subparagraph (b). Lessor will give the Secured Party written notice with reasonable promptness of any such claim against Lessor and the Secured Party may contest such claim in the name and on behalf of Lessor with counsel selected by the Secured Party at the Secured Party’s sole expense. Lessor shall execute such papers and do such things as are reasonably necessary to implement the provisions of this subpart (vi).

(vii) Upon Lessee’s final payment under the loan given by the Secured Party or upon prepayment of the loan, Secured Party will give Lessor notice of such final payment or prepayment (as the case may be).

(viii) Upon request of the Secured Party or the purchaser of Unsold Shares (referred to in Paragraph 38 below), Lessor shall enter into an agreement (commonly known as a “Recognition Agreement” ) with a Secured Party pursuant to which Lessor will acknowledge and agree that the foregoing provisions of this subparagraph (b) shall inure to the benefit of, and apply to, the Secured Party. The Recognition Agreement may contain such additional or different provisions as the Secured Party may request and Lessor shall execute and deliver same to the Secured Party provided only that such additional or different provisions are approved by counsel to the Lessor (which approval may not be unreasonably withheld or delayed and shall be. given or deemed given if the same area of substantially similar tenor to the provisions Of this subparagraph (b) All costs and expenses incurred by Lessor in connection with such Recognition Agreement (including legal fees) shall be borne entirely by Lessor, and no charge therefore may be assessed to the Secured Party or said purchasers of Unsold Shares, or his successors or assigns, including the individual acquiring this Lease and the appurtenant shares from the purchaser of Unsold Shares. The provisions of this subpart (viii) shall not apply to a lessee who is not a purchaser of Unsold Shares.

(ix) Subject to the provisions of subpart (viii) above, a Recognition Agreement between a Secured Party and Lessor may contain such additional or different provisions as may be agreed upon by the Secured Party and Lessor.

REPAIRS BY THE LESSEE 18. (a) The Lessee shall take possession Of the apartment and its appurtenances and fixtures “as is “ as of the commencement of the term hereof. Subject to the provisions of Paragraph 4 above, the Lessee shall keep the interior of the apartment (including interior walls, floors, ceilings and window panes, but excluding window frames, sashes, sills , entrance and terrace doors, frames and saddles) in good repair, shall do all of the painting and decorating required for his apartment, including the interior of window frames, sashes and sills, and shall be solely responsible for the maintenance, repair, and replacement of plumbing, gas and heating fixtures and equipment and such refrigerators, dishwashers, removable and through- the-wall air conditioners, washing machines, ranges and other appliances, as may be in the apartment. Plumbing, gas and heating fixtures as used herein shall include exposed gas ,steam and water pipes attached to fixtures, appliances and equipment and the fixtures, appliances and equipment to which they are attached, and any special pipes or equipment which the Lessee may Install within the wall or ceiling, or under the floor, but shall not include gas, steam, water or other pipes or conduits within the walls, ceilings or floors or air conditioning or heating equipment which is part of the standard building equipment. The Lessee shall be solely responsible for the maintenance, repair and replacement of all lighting and electrical fixtures, appliances, and equipment, and all meters , fuse boxes or circuit breakers and electrical wiring and conduits from the junction box at the riser into and through the Lessee’s apartment. Any ventilator or air conditioning device which shall be visible from the outside of the building shall at all times be painted by the Lessee in a standard color which the Lessor may select for the building.

Odors and Noises (b) The Lessee shall not permit unreasonable cooking or other odors to escape into the building. The Lessee shall not permit or suffer any unreasonable noise or anything which will interfere with the rights of other lessees or unreasonably annoy them or obstruct the public halls or stairways.

Equipment and Appliances (c) If, ill the Lessor’s sole judgment, any of the Lessee’s equipment or appliances shall result In damage to the building or poor quality or interruption of service to other portions of the building, or overloading of, or damage to facilities maintained by the Lessor for the supplying of water, gas electricity or air conditioning to the building, or if any such appliances visible from the outside of the building shall become rusty or discolored, then the Lessee shall promptly, on notice from the Lessor, remedy the condition and, pending such remedy, shall cease using any appliance or equipment which may be creating the objectionable condition.

Rules and Regulations and Requirements of Mortgage (d) The Lessee complies with all the requirements of the Board of Fire Underwriters, insurance authorities and all governmental authorities and with all laws, ordinances, rules and regulations with respect to the occupancy or use of the apartment. If any mortgage affecting the land or the building shall contain any provisions pertaining to the right of the Lessee to make changes or alterations in the apartment, or to remove any of the fixtures, appliances, equipment or installations, the Lessee shall comply with the requirements of the mortgage or mortgages relating thereto . Upon the Lessee’s written request, Lessor furnished Lessee with copies of applicable provisions of each and every such mortgage.

LESSOR’S RIGHT TO REMEDY LESSEE’S DEFAULTS 19. if the Lessee shall fail for 30 days after notice to make repairs to any part of the apartment, its fixtures or equipment as herein required, or shall fail to remedy a condition which has become objectionable to the Lessor for reasons set forth above, or if the Lessee or any person dwelling the apartment shall request the Lessor, its agents servants to perform any act not hereby required to be performed by the Lessor, the Lessor may make such repairs, or arrange for others to do the same, or remove such objectionable condition or equipment, or perform such act, without liability on the Lessor; provided that, if the condition requires prompt action, notice of less than 30 days may be given or, cage of emergency, no notice need be given. In all such cases the Lessor, its agents, servants and contractors shall, as between the Lessor and Lessee, be conclusively deemed to be acting as agents of the Lessee and all contracts therefore made by the Lessor shall be so construed whether or not made in the name of Lessee. If Lessee shall fail to perform or comply with any of the other covenants or provisions of this Lease within the time required by a notice from Lessor (not less than 5 days) ,then Lessor may, but shall not be obligated, to comply herewith, and for such purpose may enter upon the apartment of Lessee. The Lessor shall be entitled to recover from the Lessee all expenses incurred or for which it has contracted hereunder, such expenses to be payable by the Lessee on demand as additional rent.

INCREASE IN RATE OF FIRE INSURANCE 20. The Lessee shall not permit or suffer anything to be done or kept in the apartment which will increase the race of fire insurance on the building or the contents thereof. If, by reason of the occupancy or use of the apartment by the Lessee, the rate of fire insurance on the building or an apartment or the contents of either shall be increased, the Lessee shall (if such occupancy or use continues for more e than 30 days after written notice from the Lessor specifying the objectionable occupancy or use) become personally liable for the additional Insurance premiums incurred by Lessor or any lessee or lessees of apartments in the building on all policies so affected, and the Lessor shall have the right to collect the same for its benefit or the benefit of any such lessees as additional rent for the apartment due on the first day of the calendar month following written demand therefore by the Lessor.

ALTERATIONS 21. (a) The Lessee shall not, without first obtaining the written consent Of the Lessor, which consent shall not be unreasonably withheld or delayed, make in the apartment or building, or on any roof, penthouse, terrace or balcony appurtenant thereto, any alteration, enclosure or additions or any alteration of or addition to the water, gas, steam risers or pipes, heating or air conditioning system or units, electrical conduits, wiring or outlets, plumbing fixtures, inter- communication or alarm system or any other installation or facility in the apartment or building. The performance by Lessee of any work in the apartment shall be in accordance with all applicable rules and regulations of the Lessor and governmental agencies having jurisdiction thereof. The Lessee shall not in any case install any appliances which will overload the existing wires or equipment in the building. Anything herein or in subparagraph (b) below to the contrary notwithstanding, the consent of the Lessor shall not be required for any of the foregoing alterations, enclosures or additions made by, or the removal of any additions, improvements or fixtures from the apartment by, the Secured Party or a holder of Unsold Shares, but the consent only of the Lessor’s then managing agent will be sufficient, which consent shall not be unreasonably withheld or delayed.

Removal of Fixtures (b) Without Lessor’s written consent, the Lessee shall not remove any fixtures, appliances, additions or improvements from the apartment except as hereinafter provided. If the Lessee or a prior lessee, shall have heretofore placed, or the Lessee shall hereafter place in the apartment, at the Lessee’s own expense, any additions improvements, appliances or fixtures, including but not limited to fireplace mantels, lighting fixtures, refrigerators, air conditioners, dishwashers, washing machines, range, woodwork, wall paneling, ceilings, special doors or decorations, special cabinet work, special stair railings or other built-in-ornamental items, which can be removed without structural alterations or permanent damage to the apartment, then title thereto shall remain in the Lessee and the Lessee shall have the right, prior to the termination of this Lease, to remove the same at the Lessee’s own expense, provided: (i) that the Lessee at the time of such removal shall not be in default in the payment of rent or in the performance or observance of any other covenants or conditions of this Lease; (ii) that the Lessee shall, at the Lessee’s own expense, prior to the termination of this Lease, repair all damage to the apartment which shall have been caused by either the installation or removal of any such additions, improvements , appliances or fixtures; (iii) that if the Lessee shall have removed from the apartment any articles or materials owned by the Lessor or its predecessor in title, or any fixtures or equipment necessary for the use of the apartment, the Lessee shall either restore such articles and materials and fixtures and equipment and repair any damage resulting from their removal and restoration or replace chem with others of a kind and quality customary in comparable buildings and satisfactory to the Lessor; (iv) that if any mortgagee had acquired a lien on any such property prior to the execution of this Lease, Lessor shall first procure from Such mortgagee its written consent to removal and any cost and expense incurred by the Lessor In respect thereof shall have been paid by the Lessee; and (v) that prior to any such removal, the Lessee shall give written notice thereof do the Lessor.

Surrender on Expiration of Term (c) On the expiration or termination of this Lease, the Lessee shall surrender to the Lessor possession of the apartment with all additions, Improvements, appliances and fixtures then included therein, except as herein above provided. Any additions, improvements, fixtures or appliances not removed by the Lessee on or before such expiration or termination of this Lease shall, at the option of the Lessor, be deemed abandoned and shall become the property of the Lessor and may be disposed of by the Lessor without liability or accountability to the Lessee. Any other personal property not removed by the Lessee at or prior to the termination of this Lease may be removed by the Lessor to any place of storage and stored for the account of the Lessee without the Lessor in any way being liable for trespass, conversion or negligence by reason of any acts of the Lessor or of the Lessor’s agents, or of any carrier employed in transporting such property to the place of storage, or by reason of the negligence of any person in caring for such property while in storage.

LEASE SUBORDINATE TO MORTGAGES GROUND LEASES 22. This Lease is and shall be subject and subordinate to all present and future ground or underlying Leases and to any mortgages now or hereafter liens upon such Leases or on the land and building, or buildings, and to any and all extensions, modifications, consolidations, renewals and replacements thereof. This clause shall be self-operative, and no further instrument of subordination shall be required by any such mortgagee or ground or underlying lessee. In confirmation of such subordination the Lessee shall at any time, and from time to time, on demand, execute any instruments that may be required by any mortgagee, or by the Lessor, for the purpose of more formally subjecting this Lease to the lien of any such mortgage or mortgages or ground or underlying Leases, and the duly elected officers, for the time being, of the Lessor are and each of them is hereby irrevocably appointed the attorney-in- fact and agent of the Lessee to execute the same upon such demand, and the Lessee hereby ratifies any such -instrument hereafter executed by virtue of the power of attorney hereby given.

MECHANIC’S LIEN 23. In case a notice of mechanic’s lien against the building shall be filed purporting to be for labor or material furnished or delivered at the building or the apartment to or for the Lessee, or anyone claiming under or through the Lessee, the Lessee shall promptly cause the lien to be discharged by payment, bonding or otherwise, and if the Lessee shall fail to do so within ten days after notice from the Lessor then the Lessor may cause such lien to be discharged by payment, bonding or otherwise, without investigation as to the validity thereof or of any offsets or defenses thereto, and shall have the right to collect as additional rent, all amounts so paid and all costs and expenses paid or incurred in connection therewith, including reasonable attorney’s fees and disbursements, together with interest thereon at the maximum rate allowed by law from the time or times of payment.

COOPERATION 24.The Lessee shall always in good faith endeavor to observe and promote the cooperative purposes for the accomplishment of the Lessor is incorporated.

RIGHT OF ENTRY: KEY 25. The Lessor and its agents and their authorized workmen shall be permitted to visit, examine, or enter the apartment and any Storage space assigned to Lessee at any reasonable hour of the day upon notices or at any time and without notice in case of emergency, to make or facilitate repairs in any part of the building or to cure any default by the Lessee and to remove such portions of the walls, floors and ceilings of the apartment and storage space as may be required for any such purposes but the Lessor shall thereafter restore the apartment and Storage space to its proper and usual condition at Lessor’s expense if such repairs are the obligation of Lessor, ot at Lessee’s expense if such repairs are the obligation of Lessee or are caused by the act or omission of the Lessee or any of the Lessee’s family, guests, agents , employees or subtenants . In order chat the Lessor shall at all times have access to the apartment or storage rooms for the purposes provided for in this Lease, the Lessee shall provide the Lessor with a key to each lock providing access to the apartment or the storage rooms, and if any lock shall be altered or new installed, the Lessee shall provide the Lessor with a key thereto immediately upon installation. If the Lessee shall not be personally present to open and permit an entry at any time when an entry therein shall be necessary or permissible hereunder and shall not have furnished a key to Lessor, the Lessor or the Lessor’s agents (but, except in an emergency, only when specifically authorized by an officer of the Lessor or an officer of the managing agent of Lessor) may forcibly enter the apartment or storage space without liability for damages by reason thereof (if during such entry the Lessor shall accord reasonable care to the Lessee’s property), and without in any manner affecting the terms and provisions of this Lease. The right and authority hereby reserved do not impose, nor does the Lessor assume by reason thereof, any responsibility or liability for the care or supervision of the apartment, or any of the pipes, fixtures, appliances or appurtenances therein contained, except as herein specifically provided.

WAIVERS 26. The failure of the Lessor to insist in any one or more instances, upon a strict performance of any of the provisions Of this Lease, or to exercise any right or option herein contained, or to serve any notice, or to institute any action or proceeding, shall not be construed as a waiver, or a relinquishment for the future, of any such provisions, options or rights, but such provision, option or right shall continue and remain in full force and effect. The receipt by the Lessor of rent, with knowledge of the breach of any covenant hereof, shall not be deemed a waiver of such breach, and no waiver by the Lessor of any provision hereof shall be deemed to have been made unless in a writing expressly approved by the Directors .

NOTICES 27. Any notice by or demand from either party to the other shall be duly given only if in writing and sent by certified or registered mail return receipt requested: if by the Lessee, addressed to the Lessor at the building with a copy sent by regular mail to the Lessor’s managing agent: if to the Lessee, addressed to the building. Either party may by notice served in accordance with this Paragraph designate different addresses for service of such notice or demand. Notices or demands shall be deemed given on the date when mailed, except notices change of address shall be deemed served when received.

REIMBURSEMENT OF LESSOR’S EXPENSES 28. If the Lessee shall at any time be in default hereunder and the Lessor shall incur any expense (whether paid or not) in performing acts which the Lessee is required to perform, or in instituting any action or proceeding based on such default, or defending, or asserting a counterclaim in, any action or proceeding brought by the Lessee, the expense thereof to the Lessors, including reasonable attorneys’ fees and disbursements, shall be paid by the Lessee to the Lessor, on demand as additional rent.

LESSOR’S IMMUNITIES 29. (a) The Lessor shall not be liable, except by reason of Lessor’ s negligence, for any failure or insufficiency of heat, or of air conditioning (where air conditioning is supplied or air conditioning equipment is maintained by the Lessor), water supply, electric current, gas, telephone, or elevator service or other service to supplied by the Lessor hereunder, or for interference with light, air, view or other interests of the Lessee. No abatement of rent or other compensation or claim or eviction shall be made or allowed because of the making or failure to make or delay in making any repairs, alterations or decorations to the building, or any fixtures or appurtenances therein, or for space taken to comply with any law, ordinance or governmental regulation, or for interruption or curtailment of any service agreed to be furnished by the Lessor, due to accidents, alterations or repairs, or to difficulty or delay securing supplies or Labor or other cause beyond Lessor’s control, unless due to Lessor’s negligence.

Storage Space and Laundry (b) If the Lessor shall furnish to the Lessee any storage bins or space, the use of the laundry, or any facility outside the apartment, including but not limited to a television antenna, the same shall be deemed to have been furnished gratuitously by the Lessor under a revocable license, The Lessee shall not use such storage space for the storage of valuable or perishable property and any such storage space assigned to Lessee shall be kept by Lessee clean and free of combustibles. If washing machines or other equipment are made available to the Lessee, the Lessee shall use the same on the understanding that such machines or order and repair and that the Lessor is equipment may or may not be in good not responsible for such equipment, nor for any damage caused to the Property of the Lessee resulting from use by Lessee, and chat any use that Lessee may make of such equipment shall be at his own cost, risk and expense.

Automobiles and Other Property (c) The Lessor shall not: be responsible for any damage to any automobile or other vehicle left the care of any employee of the Lessor by the Lessee, and the Lessee hereby agrees to hold the Lessor harmless from any Liability arising from any injury to person or property caused by -or with such automobile or other vehicle while in the care of such employee. The Lessor shall not be responsible for any property left with or entrusted to any employee of the Lessor, or for the loss of or damage to any property within or without the apartment by theft or otherwise.

WINDOW CLEANING 30.The Lessee not require, permit, suffer or allow the cleaning of any window in the premises from the outside (within the meaning of Section 202 of the New York Labor Law) unless the equipment and safety devices required by law, ordinance, rules and regulations, including, without limitation Section 202 of the New York Labor Law, are provided and used, and unless the industrial code of the State of New York is fully complied with; and the Lessee hereby agrees to indemnify the Lessor and its employees, other lessees, and the managing agent, for all losses, damages or fines suffered by them as a result Of the Lessee’s requiring, permitting, suffering or allowing any window in the premises to be cleaned from the outside in violation of the requirements of the aforesaid laws, ordinances, regulations and rules.

TERMINATION OF LEASE BY LESSOR 31. If upon, or at any time after , the happening of any Of the events mentioned subparagraphs (a) through (j) of this Paragraph 31, the Lessor shall give to the Lessee a notice stating that the term hereof will expire on a date at least five days thereafter, the term of this Lease shall expire on the date so fixed in such notice as fully and completely as if it were the date herein definitely fixed for the expiration of the term, and all right, title and interest of the Lessee hereunder shall thereupon wholly cease and expire, and the Lessee shall thereupon quit and surrender the apartment to the Lessors, it being the intention of the parties hereto to create hereby a conditional limitation, and thereupon the Lessor shall have the right re-enter the apartment and to remove all persons and personal property therefrom, either by summary dispossess proceedings, or by any suitable action or proceedings at law or in equity, or by force or otherwise, and to repossess the apartment in its former estate as if this Lease had not been made, and no liability whatsoever shall attach to the Lessor by reason of the exercise of the right of re-entry, re-possession and removal herein granted and reserved:

Lessee Ceasing to own Accompanying Shares (a) If the Lessee shall cease to be the owner of the shares to which this Lease is appurtenant, if this Lease shall pass or be assigned to anyone who is not then the owner of all of the appurtenant shares;

Lessee Becoming a Bankrupt (b)If at any during the term of this Lease (i) the Lessee shall be adjudicated bankrupt under the laws of the United States; or (ii) a receiver Of all of the property of the Lessee shall be appointed under any provision of the laws of the State, of New York, or under any statute of the United States, or any statute of any state of the United States and the order appointing such receiver shall not be vacated within thirty (30) days; or (iii) the Lessee shall make a general assignment for the benefit of creditors; or (iv) any of the shares appurtenant to this Lease shall be duly levied upon under the process of any whatever unless such levy shall be discharged within thirty (30) days ; or (v) this Lease or any of the appurtenant shares shall pass by operation of law or otherwise to anyone other than the Lessee herein named or a person to whom the Lessee has assigned this Lease in the manner permitted under this Lease, this subsection (vi) shall not be applicable if this Lease shall devolve upon the executors or administrators Of the Lessee and provided that within eight (8) months (which period may be extended by the Board of Directors) after the death of Lessee this Lease and appurtenant shares shall have been transferred to any assignee in accordance with Paragraph 16 hereof; or (vii) this Lease or any of the appurtenant shares shall pass to anyone other than the Lessee herein named by reason of a default by the Lessee under a pledge or security agreement or a leasehold mortgage made by the Lessee;

Assignment, Subletting or Unauthorized Occupancy (c) If there be an assignment of this Lease, or any subletting hereunder, without full compliance with the requirements of Paragraphs 15 or 16 hereof; or if any person not authorized by Paragraph 14 shall be permitted to use or occupy the apartments and the Lessee shall fail to cause such unauthorized person to vacate the apartment within ten days after written notice from the Lessor;

Default in Rent (d) If the Lessee shall be in default for period of one month in the payment of any rent or additional rent or of any installment thereof and shall fail to cure such default within ten days after written notice from the Lessor;

Default in Other Covenants (e) If the Lessee shall be in default in the performance of any covenant or provision hereof, other than the covenant to pay rent, and such default shall continue for thirty days after written notice from the Lessor; provided, however, that if the default consists of the failure to perform any act the performance of which requires any substantial period of time, then if within that thirty (30) day period performance is commenced and thereafter diligently prosecuted to conclusion without delay and interruption. the Lessee shall be deemed to have cured the default;

Lessee’ s Objectionable Conduct (f) if at any time the Lessor shall determine, upon the affirmative vote of two-thirds of its then Board of Directors, at a meeting duly called for that purpose, because of objectionable conduct on the part of the Lessee, or of a person inhabiting or visiting the apartment, repeated after written notice from Lessor, the tenancy of the Lessee is undesirable (it being understood, without limiting the generality Of the foregoing, Chat repeatedly to violate or disregard the House Rules hereto attached or hereafter established in accordance With the provisions of this Lease, or to permit or tolerate a person of dissolute, loose or immoral character to enter or remain in the building or apartment, shall be deemed be objectionable conduct) ;

Termination of All Proprietary Leases (g) If at any time the Lessor shall determine, Upon the affirmative vote of two-thirds of its then Board Of Directors at a meeting of such directors duly called for that purpose, and the affirmative vote of the record holders of at Least eighty percent (80%) in amount of its then issued shares, at a shareholders’ meeting duly called for that purpose, to terminate all proprietary Leases ;

Destruction of Building (h) If the building shall be destroyed or damaged and the shareholders shall decide not to repair or rebuild as provided in Paragraph 4;

(i) if at any time the building or a substantial portion thereof shall be taken by condemnation proceedings;

Lessee’ s Default under Security Agreement (j) If Lessee shall default in the payment or performance of any of Lessee’s obligations under any pledge or other security agreement (the “Security Agreement”) given a Secured Party (who has complied with the provisions of Paragraph 17 , and written notice of the default is given to Lessor by the Secured Party or its counsel.

LESSOR’S RIGHTS AFTER LESSEE’S DEFAULT 32. In the event the Lessor resumes possession of the apartment, either by summary proceedings, action for ejectment or otherwise, because of default by the Lessee in the payment of any rent or additional rent due hereunder, or on the expiration of the term pursuant to a notice given as provided in Paragraph 31 hereof upon the happening of any event specified in subparagraphs (a) through (f) or subparagraph (j) of Paragraph 31, Lessee shall continue to remain liable for payment of a sum equal to the rent which would have become due hereunder and shall pay the same installments at. the time such rent would be due hereunder. No suit brought to recover any installment of rent or additional rent shall prejudice the right of the Lessor to recover any subsequent installment. After resuming possession, the Lessor may at its option, from time to time (i) relet the apartment for its own account, or (ii) relet the apartment as the agent of the Lessee, the name of the Lessee or in its own name, for a term or terms which may be less than or greater than the period which would otherwise have constituted the balance of the term of this Lease, and may grant concessions or free rent. , in its discretion. Any reletting of the apartment shall be deemed for the account of the Lessee, unless within ten days after such reletting the Lessor shall notify the Lessee that the premises have been relet for the Lessor’s own account. The fact that the Lessor may have relet the apartment as agent for the Lessee shall not prevent the Lessor from thereafter notifying the Lessee that it proposes to relets the apartment as for its own account. If the Lessor relet apartment as agent for the Lessee. it shall, after reimbursing itself for its expenses in connection therewith, including Leasing commissions and a reasonable amount for attorneys’ fees and expenses, and decorations, alterations and repairs in and to the apartment, apply the remaining avails of such reletting against the Lessee’s continuing obligations hereunder. There shall be a final accounting between the Lessor and the Lessee upon the earliest of the four following dates: (A) the date of expiration of the term of this Lease as stated on page 1 hereof; (B) the date as of which a new proprietary Lease covering the apartment shall have become effective; (C) the date the Lessor gives written notice to the Lessee that it has relet the apartment for its own account; (D) the date upon which all proprietary Leases of the Lessor terminate. From and after the date upon which the Lessor becomes obligated to account to the Lessee, as above provided, the Lessor shall have no further duty to account to the Lessee for any avails of reletting and the Lessee shall have no further liability for sums thereafter accruing hereunder, but such termination of the Lessee’s liability shall not affect any liabilities theretofore accrued.

Collection of Rent from Subtenants (b) If the Lessee shall at any time sublet the apartment and shall default in the payment of any rent or additional rent, the Lessor may, at its option i so long as such default shall continue, demand and receive from the subtenant the rent due or becoming due from such subtenant to the Lessee, and apply the amount to pay sums due and to become due from the Lessor. Any payment by a subtenant to the Lessor shall constitute a discharge of the obligation of such subtenant to the Lessee, to the extent of the amount so paid. The acceptance of rent from any subtenant shall not be deemed to consent to or approval of any subletting or assignment by the Lessee or a release or discharge of any of the obligations of the Lessee hereunder.

Sale of Shares (c) Upon the termination of this Lease under the provisions of sub paragraphs (a) through (f) or subparagraph (j) or Paragraph 31, the Lessee shall surrender to the Lessor the certificate for the appurtenant shares of the Lessor owned by the Lessee. Whether or not the certificate is surrendered, the Lessor may issue a new proprietary Lease for the apartment and issue a new certificate for Lessee’s shares of the Lessor when purchaser for the apartment is obtained, provided that the issuance of shares and a new proprietary lease to such purchaser is authorized by a resolution of the Directors, or by a writing signed by a majority Of the Directors or by lessees owning, of record, at least a majority of the shares of the Lessor accompanying proprietary Leases then in force, upon issuance of a new certificate, the certificate owned or held by the Lessee shall be automatically cancelled and rendered null and void. The Lessor shall apply the proceeds received for the issuance of replacement shares first, towards the payment of Lessee indebtedness hereunder (including interest, attorneys’ fees and other expenses incurred by the Lessor) ; second, if the termination shall result pursuant to subparagraph (j) of Paragraph 31 by reason of a default under a Security Agreement, towards the payment of Lessee’s indebtedness under that Security Agreement (including all cost expenses and charges payable by Lessee thereunder) ; and, third, if the proceeds are sufficient to pay the same, the Lessor shall pay over any surplus to the Lessee, but, if insufficient, the Lessee shall remain liable for the balance of the indebtedness due hereunder or (if applicable) under the Security Agreement. Upon the issuance of any new proprietary lease and replacement share, the Lessee’s liability hereunder shall cease, and the Lessee shall only be liable for rent and expenses accrued to that time. The Lessor shall not, however, be obligated to sell such shares and appurtenant Lease or otherwise make any attempt to mitigate damages.

WAIVER OF RIGHT OF REDEMPTION 33. The Lessee hereby expressly waives any and all right of redemption in case the Lessee shall be dispossessed by judgment or warrant of any court or judge. The words “enter”, “re-enter” and Ore-entry” as used in this Lease are not restricted to their technical legal meaning.

SURRENDER OF POSSESSION 34. Upon the termination of this Lease under the provisions of subparagraphs (a) through (f) or subparagraph (j) of Paragraph 31, the Lessee shall remain liable as provided in Paragraph 32 of this Lease. Upon the termination of this Lease under any other of its provisions, the Lessee shall be and remain liable to pay all rent, additional rent and other charges due or accrued and to perform all covenants and agreements of the Lessee up to the date of termination. On or before any such termination, the Lessee shall vacate the apartment and surrender possession thereof to the Lessor and upon demand of the Lessor, shall execute. acknowledge and deliver to the Lessor any instrument which may reasonably be required to evidence the surrendering of all estate and interest of the Lessee in the apartment, or in the land and building of which it is a part.

LESSEE’S OPTION TO CANCEL 35. (a) This tease may be cancelled by the Lessee on any September 30th after the third anniversary of the consummation of the Plan of cooperative organization pursuant to which proprietary Leases were originally issued, upon complying with all the provisions hereinafter set forth. Irrevocable written notice of intention to the Lessor on or before April 1st in the calendar year in which such cancellation is to occur. At the time of the giving of such notice of intention to cancel, Lessee must deposit with the Lessor:

Deposits Required (i) the Lessee’s counterpart of this Lease with a written assignment in form required by the Lessor, in blank, effective as of August 31 of the year of cancellation, free from all subleases, tenancies, liens, encumbrances, pledges, security interests and other charges whatsoever (except rights of. occupancy of third parties existing on the date the Lessor acquires title to the building);

(ii) the Lessee’s certificate for his shares of the Lessor, endorsed in blank for transfer and with all necessary transfer tax stamps affixed and with payment of any transfer taxes due thereon;

(iii) a written statement setting forth in detail those additions, improvements, fixtures or equipment which the Lessee has, under the terms of this Lease, the right to and intends to remove.

Removal of Fixtures: Possession (b) All additions, improvements, appliances and fixtures which are removable under the terms of this Lease and which are enumerated in the statement made as provided in subdivision ( i i i ) above shall be removed by the Lessee prior to August 31st of year of cancellation, and on or before that date the Lessee shall deliver possession of the apartment to the Lessor in good condition with all required equipment, fixtures and appliances installed and in proper operating condition and free from all subleases and tenancies, liens, encumbrances, pledges, security interest and other charges and pay to the Lessor all rent, additional rent and other charges which shall be payable under this Lease up to and including the following September 30th.

Permission to Show and Occupy Premises (c)The Lessor and its agents. may show the apartment to prospective Lessees, contractors and architects at reasonable times after notice of the Lessee’s intention to cancel this Lease. After August 31st or the earlier vacating of the apartment, the Lessor and its agents, employees and Lessees may enter and occupy the apartment, and make such alterations and additions therein as the Lessor may deem necessary or desirable without diminution or abatement of the rent due hereunder.

Effective Date of Cancellation (d) If the Lessee is not otherwise in default hereunder and if the Lessee shall have timely complied With all of the provisions of subparagraphs (a) and (b) hereof, then this Lease Shall be Cancelled and all rights, duties and obligations of the parties hereunder shall cease as of the September 30th fixed in the notice from Lessee, and the Shares of Lessor shall become the absolute property of the Lessor, provided, however, that the Lessee shall not be released from any indebtedness owing to the Lessor as of September 30th.

Rights of Lessee on Default (e) If the Lessee shall give the notice but fail to comply with any of the other provisions of this paragraph, the Lessor shall have the option at any time prior to September 30th (i) of returning to the Lessee this Lease, the certificate for shares and other documents deposited, and thereupon the Lessee shall be deemed to have withdrawn the notice of intention to cancel this Lease, or (ii) of treating this Lease as cancelled as of September 30th , and bringing such proceedings and actions as it may deem best to enforce the covenants of the Lessee herein above contained and to collect from the Lessee the payments which the Lessee is required to make hereunder, together with reasonable attorney’ s fees and expenses.

EXTENSION OF OPTION TO CANCEL 36. (a) If on April 1st in any year the total number of shares owned by lessees holding proprietary Leases who have given notice pursuant to Paragraph 35 of intention to cancel proprietary Leases on September 30th of that year shall aggregate ten percent (IO%) or more of the Lessor’s outstanding shares, exclusive of treasury shares, then the shall, prior to April 30th of that year, give written notice to the holders of all issued shares of the Lessor, stating the total number of shares then outstanding and in its treasury and the total number of shares owned by lessees holding proprietary Leases who have given notice of intention to cancel. In such case the proprietary lessees to whom such notice shall have been given shall have the right to cancel their Leases in compliance with the provisions of Paragraph 35 hereof, provided only that written notice of the intention to cancel such Leases shall be given on or before July 1st instead of April 1st.

Right of Lessees to Cancel (b) If lessees owning at least eighty percent (80%) of the then issued and outstanding shares of the Lessor shall exercise the option to cancel their Leases in one year, then this Lease and all other proprietary Leases shall thereupon terminate on the September 30th of the year in which such options shall have been exercised, as though every lessee had exercised such option. In such event none Of the lessees shall be required to surrender his shares to the Lessor and all certificates for shares delivered to the Lessor by those who had, during that year, served notice of intention to cancel their Leases under the provisions hereof, shall be returned to such lessees.

CONTINUANCE OF COOPERATIVE OF BUILDING AFTER ALL LEASES TERMINATED 37. No later than thirty days after the termination of all proprietary Leases, whether by expiration of their terms or otherwise, a special meeting of shareholders of the Lessor shall take place to determine whether (a) to continue to operate the building as a residential apartment building, (b) to alter, demolish or rebuild all or any part of the building, or (c) to sell the building and liquidate the assets of the Lessor, and the Directors shall carry out the determination made at the meeting of shareholders of the Lessor, and all of the holders Of the then issued and outstanding shares of the Lessor shall have such rights as Inure to the benefit of shareholders of corporations having title to real estate .

UNSOLD SHARES 38. (a) The term ‘”Unsold Shares” means and has exclusive reference to the shares of the. Lessor which were issued to the Lessor’ s grantor(s) or individuals who were formally designated in writing as Holders of unsold Shares by Lessor’ s grantor and who were produced by the Lessor’ s grantor(s) pursuant to the Plan of cooperative organization of Lessor or Contract of Sale under which the Lessor acquired title to the building or to a nominee of such grantor(s) or individual (s) ; and, upon the transfer of any shares which are Unsold Shares they will remain Unsold Shares only if the Sponsor formally designates in writing that the shares are to remain Unsold Shares. Moreover, if the shares are further transferred, they shall remain Unsold Shares only if any subsequent holder thereof obtains from the Sponsor a formal designation (in writing) that the shares are to remain as Unsold Shares. Notwithstanding that certain shares may have been designated as Unsold Shares by the Sponsor, said shares shall only retain their character as such (regardless of transfer) until (1) such shares become the property of a purchaser for bona fide occupancy (by himself or a member of his family) of the apartment to which such shares are allocated, or (2) the holder of such shares (or a member of his family) becomes a bona fide occupant of the apartment. This Paragraph 38 shall become inoperative as to this Lease upon the occurrence of either of the foregoing events with respect to the Unsold Shares held by the Lessee or his assignee .The term “holder Of Unsold Shares” wherever used herein shall include a “purchaser of Unsold Shares,” such terms being used interchangeably in this Lease.

Subletting Apartment and Sale of Shares (b) Neither the subletting of the apartment nor the assignment of this Lease, by the Lessee who is a holder of Unsold Shares allocated thereto, shall require the consents of the Directors or shareholders, as provided in Paragraph 15 and 16. Accordingly, each holder of Unsold Shares shall have the right freely and without charge (for services rendered, by a “flip” or “transfer” fee or any fee imposed by the Apartment Corporation) to either sublet his Apartment to any person on such terms and conditions as he deems desirable or to sell such Unsold Shares and transfer the proprietary Lease to any third party.

Change in Form of Lease (c) Without the consent of the Lessee, no change in the form, terms or conditions of this Lease, as permitted by Paragraph 6, shall (1) affect the rights of the Lessee who is the holder of the Unsold Shares accompanying this Lease to sublet the apartment or to assign this Lease, as provided in this paragraph, or (2) eliminate or modify any rights, privileges or obligations of such Lessee.

(d) The provisions of Paragraph 35 of this Lease shall not be applicable to any Lessee who is a holder of unsold Shares.

FORECLOSURE: RECEIVER OF RENTS 39. Notwithstanding anything contained in this Lease, if any action shall be instituted to foreclose any mortgage on the land or the building or the Leasehold of the Land or building, the Lessee shall, on demand, pay to the receiver of the rents appointed in such action rent, if any, owing hereunder on the date of such appointment and shall pay thereafter to such receiver in advance, on the first day of each month during the pendency of such action, as rent hereunder, the rent for the apartment as last determined and established by the Directors prior to the commencement of the action, and such shall be paid during the period of such commencement of the action, and such receivership, whether or not the Directors shall have determined and established the rent payable hereunder for any part of the period during which such receivership may continue e The provisions of this Paragraph are intended for the benefit of present and future mortgagees of the land or the building or the Leasehold of land or building and may not be modified or annulled without the prior written consent of any such mortgage holder ,

TO WHOM COVENANTS APPLY 40. The reference herein to the Lessor shall be deemed to include its successors and assigns, and the references herein to the Lessee or to a shareholder of the Lessor shall be deemed to include the executors , administrators, legal representatives, legatees, distributees and assigns of the Lessee or of such shareholder; and the covenants herein contained shall apply to, bind and Inure to the benefit of the Lessor and its successors and assigns, and the Lessee and the executors, administrators, legal representatives, legatees, distributees, successors and assigns of the Lessee , except as herein above stated.

WAIVER OF TRIAL BY JURY 41. To the extent permitted by law, the respective parties hereto shall and they hereby do waive trial by jury in any action, against the other on any matters whatsoever arising out of or in any way connected with this Lease, the Lessee’ s use or occupancy of the apartment, or any claim of damage resulting for, any act or omission of the parties in any way connected with this Lease or the apartment.

LESSOR’S ADDITIONAL REMEDIES 42. In the event of a breach or threatened breach by Lessee of any provision hereof, the Lessor shall have the right of injunction and the right to invoke any remedy at law or in equity, as if re-entry, summary proceedings and other remedies were not herein provided for, and the election of one or more remedies shall not preclude the Lessor from any other remedy .

LESSEE MORE THAN ONE PERSON 43. If more than one person is named as Lessee hereunder, the Lessor may require the signatures of all such persons in connection with any notice to be given or action to be taken by the Lessee hereunder, including, without limiting the generality of the foregoing, the Surrender of assignment of this Lease, or any request for consent to assignment or subletting. Each person named as Lessee shall be jointly and severally liable for all of the Lessee’s obligations hereunder. Any notice by the Lessor -to any person named as Lessee shall be sufficient, and shall have the same force and effect, as though given to all persons named as Lessee.

EFFECT OF PARTIAL INVALIDITY 44. If any clause or provision herein contained shall be adjudged invalid, the same shall not affect the validity of any Other clause or provisions of this Lease or constitute any cause of action in favor of either party as against the other.

NOTICE TO LESSOR OF DEFAULT 45. The Lessee may not institute an action or proceeding against the Lessor or defend, or make a counterclaim in any action by the Lessor related to the Lessee’s failure to pay rent, if such action, defense or counterclaim is based upon the Lessor’s failure to comply with its obligations under this Lease or any law, ordinance or governmental regulation unless such failure shall have continued for thirty days after the giving of written notice thereof by the Lessee to the Lessor.

UNITY OF SHARES AND LEASE 46. The shares of the Lessor held by the Lessee and allocated to the apartment have been acquired and are owned subject to the following conditions agreed upon With the Lessor and with each of the other proprietary Lessees for their mutual benefit:

(a) the shares represented by each certificate are transferable only as an entirety and only in connection with a simultaneous transfer of this Lease, unless transferred pursuant to Section 4 of Article V of the By-Laws of the Lessor in connection with the regrouping of space in one or more apartments.

(b) the shares shall ‘not be sold or transferred except to the Lessor or to an assignee of this Lease after compliance with all of the provisions of Paragraph 16 of this Lease relating to assignments.

CHARGES FOR GAS AND ELECTRICITY 47. If at any time or times during the terms of this Lease the consumption of gas or electricity or both, the apartment is measured by a meter which also measures consumption outside the apartment, the Lessor may determine from time to time by resolution of the Board of Directors thereof, the charges, if any, to be paid by the Lessee on account of such consumption of gas or electricity, or both, and any such charges shall be payable monthly in advance or in such payments or installments as shall be required by the Directors, and at such times as shall be provided in such resolution, Such charges may be determined in the proportion that the number of shares of Lessor allocated to the apartment bears to all shares of Lessor then issued and outstanding or in the approximate proportion that the floor area of the apartment bears to all floor areas measured by such meter, or such other equitable method as may be determined by the Directors .

NO DISCRIMINATION 48. The Lessor will riot discriminate against any person because of his race, creed, religion, color, national origin, sex or other ground proscribed by law when exercising any right reserved to it in this Lease.

RESTRICTIONS ON HOLDERS OF UNSOLD SHARES 49. Holders of Unsold Shares may not cancel their proprietary leases unless (i) shareholders owning a majority of the Lessor’ s outstanding shares (other than Unsold Shares) shall have given notice of their intention to cancel or (ii) all Unsold Shares constitute fifteen percent (15%) or less of the apartment corporation’s outstanding shares at least five (5) years have elapsed since the apartment corporation acquired title to the building and on the effective date of cancellation Holders of Unsold Shares shall pay to the apartment corporation a sum equal to the product of the then current monthly rent (maintenance charges) payable under the proprietary Lease multiplied by twenty-four (24).

DUTIES OF NON-OCCUPANT LESSEES 50. A lessee who owns shares allocated to an apartment occupied by a non-purchasing tenant owns such shares subject to the terms and conditions of the existing lease or tenancy and the applicable provisions of the laws of the State and City of New York then in effect. A non-occupant lessee shall be required to pay maintenance charges and expenses for his apartment to the apartment Corporation, even if the amount of said maintenance charges and expenses exceed the amount of the rent received from the tenant in occupancy. In addition, a non-occupant lessee Shall be responsible for any and all litigation costs, fees and dues related to the tenancy. Such lessee shall also be responsible to perform all obligations of the landlord pursuant to the lease or tenancy of the tenant in occupancy which shall include without limitation ,the obligation of repair, replacement and maintenance of the plumbing fixtures refrigerator, range, lighting fixtures and other equipment in the apartment, as well as painting of the apartment. Such lessee also agrees to (i) join the Rent Stabilization Association or other industry organization required by The Omnibus Housing Act of 1983 and (ii) abide by the rules and regulations of applicable rental laws. Each lessee who purchases shares allocated to an apartment occupied by a non-purchasing tenant must irrevocably appoint the Apartment Corporation’s Managing Agent and its successors as his agent to provide to the non-purchasing tenant all services and facilities required by law.

The Apartment Corporation’s Managing Agent is authorized on behalf and at the expense of any lessee who owns shares allocated to an apartment occupied by a non-purchasing tenant to provide the non-purchasing tenant all services and facilities required by law on a non-discriminatory basis. The lessee of an apartment occupied by a non-purchasing tenant (other than a holder Of Unsold Shares) is required to deposit closing (and keep on deposit) with the Managing Agent an amount equal to two (2) months’ of annual rent (maintenance charges) which sum may be used by the Managing Agent to provide such services and facilities to the non-purchasing tenant as are required by the terms of the tenant’s lease or law. The amount deposited shall be promptly replenished by the lessee to the extent the deposit is so applied by the Managing Agent. Such sum shall be held by the Managing Agent to provide services and facilities required by law and the unapplied amount shall be returned to the lessee when he sells and transfers ownership of the Apartment. The requirements of this paragraph shall not be applicable to the Holders of Unsold Shares (including, but not limited to, the sponsor of the cooperative offering plan to convert: the building to cooperative ownership.

COMPLIANCE WITH LAWS 51. Lessor shall have the right to take whatever action it deems necessary or appropriate in order to comply with any and all present and future laws, ordinances, rules, regulations, resolutions or orders of any city, town or village in which the building lies or of any board, bureau, commission, department or body of any municipal, city, state or federal sovereign or other governmental authority now or hereafter having or acquiring jurisdiction of the building or the use and improvement thereof.

CHANGES TO BE IN WRITING

53. The provisions of this Lease cannot be changed orally.

IN WITNESS WHEREOF, the parties have executed this Lease.

Lessor: 111 Fifth Avenue Owners Corp.

By______________________________ , President Lesse: _______________________(L.S.) _______________________(L.S.)

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The Key to New York City Coop Ownership: Understanding Proprietary Leases

by Robert Pair | Oct 6, 2023 | Owner Education , Property Management Education | 0 comments

Buying a co-op in NYC is a great way to purchase property in your desired neighborhood. There’s a lot involved in the purchase, however, and you may need some help navigating the process, whether you’re new to the market or you’ve done this type of purchase before. 

Even the terminology can be a bit confusing. 

For example, if you are looking to buy a co-op apartment in New York City, you will likely come across the term “proprietary lease.” What does this mean, and how does it impact you during the purchase process and once you close on your new home? 

We’re taking a look at proprietary leases and how they might affect your buying decision when it comes to NYC real estate . 

Defining and Understanding a Proprietary Lease 

What is a proprietary lease? What does it entail, and why do you need to understand it if you are considering buying a co-op in NYC?

A proprietary lease is a legal document that outlines the terms of a co-op shareholder’s ownership of their unit . 

When we talk about a proprietary lease, we’re talking about a contract between a co-op shareholder and the co-op corporation that owns the building. This lease will outline the rights and responsibilities of the shareholder and the co-op corporation. It will also specify the terms under which the shareholder may occupy their unit. 

Essentially, a proprietary lease is a lease that gives the shareholder the right to occupy their unit in the building as well as the right to use common areas and facilities that the building provides. 

Sometimes, this may also be called an occupancy agreement. 

Most of the units in New York City are co-ops, so unless you are buying an apartment or a condo, you’re likely to find that the proprietary lease is one of the documents within the co-op’s offering plan. The lease covers more than basic occupancy; the legal concept also covers the specifics of the relationship between shareholders and the cooperative. 

As we will discuss, you’ll find in the proprietary lease rules for renovations you might want to make to your unit, when you can and cannot sublet, how to manage maintenance and repairs, and more. This is the contract that essentially governs the way you live in the property you’re buying. Your residency in the building depends on following the terms found in the proprietary lease.

What Details Can be Found in a Proprietary Lease?

A proprietary lease typically includes several key provisions, including:

• The length of the lease term. Proprietary leases are usually for a term of 99 years, but the term can vary depending on the co-op corporation’s bylaws. Why 99 years? There’s no good answer to that, except that traditionally this was the number chosen because it would safely cover the lifespan of the property owner. 
• The shareholder’s right to occupy the unit. The proprietary lease specifies the shareholder’s right to occupy their unit, subject to the co-op corporation’s rules and regulations. 
• The shareholder’s obligations: The proprietary lease outlines the shareholder’s obligations to pay maintenance fees, abide by the co-op corporation’s rules and regulations, and maintain their unit in good condition.
• The co-op corporation’s obligations: The proprietary lease outlines the co-op corporation’s obligations to maintain the building and common areas, provide essential services, and enforce rules and regulations.
• Termination provisions: The proprietary lease specifies the circumstances under which the lease can be terminated, such as non-payment of maintenance fees or violation of co-op corporation rules.

These are the common areas that will be covered by your proprietary lease, and each will have its own details and requirements, depending on your property and the building you’re buying into. 

Why is a Proprietary Lease Important for NYC Co-Ops?

Maybe you’re wondering why this is necessary. After all, you’re paying for a specific property; do you really have to have the extra paperwork to prove you have a right to live in that property? 

Yes. This isn’t the same as buying a single-family home. This is also New York. The lease is for the protection of all parties. A proprietary lease is an essential document that governs the relationship between co-op shareholders and the co-op corporation. It outlines the rights and responsibilities of each party and provides a legal framework for ownership and occupancy of co-op units. 

Without a proprietary lease, it would be difficult to establish clear ownership rights or enforce rules and regulations within the building.

Understanding the Difference Between Bylaws and a Proprietary Lease 

Proprietary leases and bylaws both dictate the rules of the co-op, but each document has a different focus and is used in different ways and at different times. 

Bylaws focus on rules of the property, like what you can and can’t leave in common areas. They will tell you if you can throw a private party in a communal library or who may use the business center. Proprietary leases focus on the agreement between the shareholder/tenant and the co-op; they grant rights to use and occupy the property as a residence.

Co-ops are different from other types of NYC real estate. The co-op board governs everything that happens within the building, and they have the power to impose significant restrictions in their bylaws. For example, they can dictate whether or not you can sublet your unit, and who you can sell your property to.

A proprietary lease is a legal document that outlines the terms of a co-op shareholder’s ownership of their unit. It is an essential document that establishes the legal relationship between the co-op shareholder and the co-op corporation, and it outlines the rights and responsibilities of each party. If you are considering buying a co-op apartment in New York City, it’s important to understand what a proprietary lease is and what it entails, so you can make an informed decision about your investment.

Located in Upper Manhattan, Harlem Property Management is the authority on NYC co-op and condo building management and a member of the Real Estate Board of New York. We specialize in managing condos, co-ops, and multi-family buildings.

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Understanding the Concept of a Proprietary Lease

Table of Contents

A Comprehensive Look at Proprietary Leases

When it’s about renting a property, you might have encountered various lease agreements. Among them, the proprietary lease holds a unique significance in the real estate market. In this article, we will explore the intricacies of a proprietary lease, its key features, and the rights and responsibilities it entails for both tenants and landlords. Whether you are a property owner or a prospective tenant, understanding the details of a proprietary lease is crucial. So, let’s dive in and dissect this topic further.

Understanding the Essence of a Proprietary Lease

A proprietary lease is a legally binding contract that grants tenants the exclusive right to occupy a particular unit within a cooperative housing corporation or a housing cooperative. Unlike a standard lease agreement, which applies to rental properties, a proprietary lease is specific to cooperative housing structures. It serves as a document that outlines the conditions and terms of the tenant’s occupancy while governing the tenant-cooperative corporation relationship.

Exploring the Unique Aspects of a Proprietary Lease

A proprietary lease comes with its own set of distinctive features that set it apart from traditional lease agreements. Let’s delve into some key aspects:

Rights and Responsibilities : Tenants under a proprietary lease possess the right to occupy and utilize the designated unit as their primary residence. However, they must also fulfill specific responsibilities, including paying maintenance fees, complying with cooperative rules and regulations, and maintaining the unit in good condition.

Duration and Termination : Unlike regular lease agreements with fixed terms, proprietary leases are typically long-term, often spanning multiple years or even decades. These leases usually continue until the tenant voluntarily relinquishes their occupancy rights or breaches the lease terms.

Restrictions and Limitations : Proprietary leases may impose certain restrictions on tenants, such as limitations on subletting, making alterations to the unit, or unauthorized use of common areas. Tenants should carefully review these limitations and ensure they align with their needs and lifestyle.

The Path to Obtaining a Proprietary Lease

If you wish to reside within a cooperative housing structure and obtain a proprietary lease, there are specific steps you need to follow. Here’s a breakdown of the process:

Application Process : The initial step is to submit an application to the cooperative corporation. This usually involves providing personal information, financial statements, references, and any other documentation required by the cooperative.

Approval Criteria : Cooperatives typically have a board of directors or a similar governing body responsible for reviewing applications. They assess various factors, including financial stability, creditworthiness, and compatibility with the cooperative community, to determine the suitability of prospective tenants.

Costs and Fees : When applying for a proprietary lease, be prepared for associated costs and fees, such as application fees, processing fees, background check fees, and attorney fees for reviewing the lease agreement. It’s crucial to have a clear understanding of these financial obligations before proceeding.

Pros and Cons of a Proprietary Lease

Like any legal agreement, proprietary leases have their pros and cons. Let’s examine both sides of the coin:

Advantages:

Security of Tenure : In contrast to traditional rental agreements, proprietary leases provide tenants with long-term occupancy rights, fostering stability and a sense of ownership within the cooperative community.

Cooperative Community : Living within a cooperative housing structure often cultivates a close-knit community environment, where residents collaborate and have a say in the management and decision-making processes.

Disadvantages:

Limited Control : As a tenant in a cooperative housing structure, you may have limited control over certain aspects, such as making structural changes, subletting, or even selecting your neighbors, as these decisions are often subject to the cooperative’s rules and regulations.

Financial Commitments : Apart from monthly maintenance fees, tenants may be responsible for other financial obligations, such as special assessments for building repairs or capital improvements. It’s crucial to assess your financial capacity before committing to a proprietary lease.

Understanding the Tenant-Landlord Relationship

In a proprietary lease agreement, the relationship between the tenant and the landlord, typically the cooperative corporation, is distinct. Let’s explore the roles and responsibilities of each party:

Role of the Landlord : The cooperative corporation acts as the landlord in a proprietary lease agreement. They are responsible for maintaining the building, managing common areas, collecting maintenance fees, and enforcing the rules and regulations of the cooperative.

Tenant’s Obligations : Tenants are responsible for paying monthly maintenance fees, abiding by the cooperative’s rules and regulations, maintaining the unit in good condition, and respecting the rights and privacy of fellow residents.

Common Issues and Disputes Related to Proprietary Leases

While proprietary leases aim to provide a harmonious living environment, conflicts can still arise. Here are some common issues and disputes that tenants and landlords may encounter:

Maintenance and Repairs : Disputes may occur regarding the responsibility for maintenance and repairs, especially when distinguishing between issues within individual units and those affecting common areas.

Rule Violations : Instances where tenants violate cooperative rules and regulations, such as noise disturbances, unauthorized alterations, or improper use of common areas, can lead to disputes between tenants and the cooperative corporation.

To resolve these disputes, it is advisable to consult legal professionals experienced in real estate matters.

Key Clauses to Consider in a Proprietary Lease

Before signing a proprietary lease, it is essential to meticulously review the document and pay attention to specific clauses that may have significant implications. Here are some important clauses to consider:

Occupancy Restrictions : Clauses outlining occupancy restrictions provide tenants with information regarding limitations on the number of occupants, guests, or even pets allowed within the unit.

Maintenance Obligations : Understanding the tenant’s maintenance obligations, as well as the cooperative’s responsibilities in terms of repairs and maintenance, is crucial for a seamless living experience.

In conclusion, proprietary leases hold their own unique significance in the realm of real estate, primarily within cooperative housing structures. They offer tenants long-term occupancy rights and establish a relationship between the tenant and the cooperative corporation. However, it is vital to carefully review the terms and conditions of a proprietary lease and understand the rights and responsibilities it entails.

Whether you seek stability and community as a tenant or consider cooperative housing as a property owner, a proprietary lease is a legally binding agreement that should not be taken lightly. By understanding its key features, rights, and limitations, you can navigate the world of proprietary leases confidently.

For professional assistance with real estate matters, you can rely on Garrity Traina. Our experienced team provides guidance and expertise to individuals and businesses in various real estate transactions.

Remember, knowledge is power when it comes to proprietary leases, and understanding the nuances of this unique lease agreement empowers you to make informed decisions for a secure and prosperous living experience.

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About the author.

Garrity Traina

Mr. Traina holds bachelor’s degrees in Journalism and Computer Science and earned his law degree at Nova Southeastern University, having been a Goodwin Scholar. As a Registered Patent Attorney at Garrity Traina , Mr. Traina assists clients with the preparation and filing of patent applications in a wide array of fields. He is also an editor of the Barrister, a monthly publication of the Broward County Bar Association, and is a former member of the board of directors of ArtServe, a South Florida art incubator that has been supporting local artists for more than 25 years. He is also a member of the Broward County Bar Association and the Intellectual Property Law Association of Florida. In addition, Mr. Traina guest lectures on a variety of intellectual property topics in engineering and law classes, organizational events, and more. See more About us .

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Proprietary Lease Guide

Hash-mark table of contents.

What Is a Proprietary Lease? Co-ops and Proprietary Leases Responsibilities of the Corporation According To the Proprietary Lease Shareholders’ Responsibility According to the Proprietary Lease Proprietary Lease Bottom Line

hash-mark What Is a Proprietary Lease?

A proprietary lease is a special type of lease agreement signed between a co-op corporation and each individual unit owner. Also known as an occupancy agreement, a proprietary lease along with the corporate by-laws govern the relationship between the parties. These documents are important because an owner of a co-op apartment is a shareholder in the corporation and, therefore is not a statutory tenant under New York City rent regulation laws. As such, a shareholder’s occupancy and relationship with the cooperative are governed by the terms of the proprietary lease as well as New York State business law that regulates corporations who operate for the benefit of their shareholders. 

The proprietary lease and the by-laws are both of interest to shareholders in the offering plan. Together, these documents govern the relationship between shareholders and the cooperative building. Specifically, the by-laws detail how the property is organized and managed, who can be and run for its board of directors, how elections are run and held, etc. Typically, the by-laws include another document called the house rules, which are rules by which the residents of the cooperative building are expected to abide by. 

hash-mark Co-ops and Proprietary Leases

Approximately 75% of apartments available for sale in New York City are in cooperative buildings (or “Co-ops”). Ownership in a co-op apartment is NOT the same as owning a condominium apartment or owning a single-family home. Specifically, when a buyer is purchasing a co-op apartment, they are not buying real property. Instead, they are buying shares in a cooperative corporation. Upon buying the shares, the buyer becomes a shareholder. In return, the corporation and shareholder enter into a document called a proprietary lease, where the shareholder becomes a tenant in the building. The larger the co-op apartment, the more shares the buyer owns in the cooperative building/corporation.  

When purchasing your apartment, your lawyer will advise you to examine the “offering plan” for the building. This document is typically over 100 pages and is drafted by the sponsor. The sponsor is the entity that is constructing the cooperative building or converting the building. This document contains information for the shareholders, including but not limited to the original offering plan, initial engineer’s report for the building, original terms of sale, legal description of the property, the proprietary lease, and the by-laws for the corporation, etc. If you are a current shareholder in a cooperative apartment, without a doubt, your lawyer spent time reviewing this document before your closing. After closing, you should have obtained a copy for your records; if not, your bank and lawyer should have a copy. 

hash-mark Responsibilities of the Corporation According To the Proprietary Lease

The proprietary lease details the essential functions of the cooperative/corporation. Specifically, how the corporation will maintain the building in good condition to benefit all the shareholders of the building. The proprietary lease governs the monthly maintenance payments, monthly bills, the manner in which the building will contract for services and repairs, and how the building will comply with all local, state, and federal laws. Typically, the cooperative may hire other people or companies to do these tasks. 

The job of the cooperative building is to inspect shareholders’ apartments and give them advice and guidance on how to maintain their apartments. On the other hand, it is the shareholder’s responsibility to maintain their apartment. For example, if the shareholder has a leaky pipe, it is the responsibility of the shareholders to call a plumber. Overall many co-ops may inspect apartments to check for violations, leaks, or to investigate complaints further. For example, a shareholder who resides below you may complain about a bathroom leak. As such, the cooperative may inspect your apartment to see if your apartment is the cause of the leak. Upon inspection, the cooperative may discover that you need new grout or caulk in your bathroom. In this instance, the shareholder may instruct the Super to perform these repairs, and the shareholder will be billed back for them. Additionally, if the shareholder’s negligence has caused some damage to the apartment below, the shareholder is responsible. This is the reason why shareholders are required to carry insurance in their apartments.

hash-mark Shareholders’ Responsibility According to the Proprietary Lease

The proprietary lease will also detail the responsibilities each shareholder has. The fact that so many shareholders are former renters often creates confusion when it comes to proprietary leases. For example, in a rental, the landlord is the owner of the building and is responsible for most of, if not all, the repairs required inside of the apartment. However, in a cooperative apartment, the shareholder is the owner of the apartment; as such, any finishes and fixtures therein are their responsibility.

1. Shareholders Are Responsible for Apartment Repairs and Maintenance 

Typically, shareholders are responsible for repairs and maintenance of their apartment, which includes any finishes and fixtures, such as paint, wallpaper, hardwood floors, tubs, shower bodies, etc. Additionally, they are responsible for routine maintenance of things that belong to the corporation, such as the windows and the radiators within the apartment. 

2. The Proprietary Lease Details How Renovations Are Performed

While it is true that the shareholder owns the interior space of the apartment, the rules are not so clear-cut when it comes to renovating that space. Specifically, if a shareholder wants to renovate or alter his or her residence, he or she may have to make structural changes that may affect the main structure of the building, as well as the legal status of the building, according to the New York City Department of Buildings. 

Therefore, the cooperative has to protect the interests of all its shareholders and the building in this situation. Thus, the proprietary lease will require written permission in the form of an Alteration Agreement from the cooperative for any renovations or alterations that the shareholder wants to make. While it may be annoying to some shareholders to file an Alteration Agreement for minor work such as painting a bedroom, these rules are designed to protect the cooperatives and its shareholders. Additionally, the process protects the cooperative and its shareholders by permitting only licensed and insured professionals to conduct work within the building. In this instance, it provides additional assurance that if something is damaged while work is performed in your apartment, the cooperative can seek compensation.

hash-mark Proprietary Lease Bottom Line

Most shareholders should review their proprietary lease in detail before purchasing their cooperative apartment. However, if you’ve already purchased your apartment, it’s still a good idea to review the document so that you understand your duties and responsibilities as a shareholder/owner. 

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Proprietary Lease: What Is It and How Does it Work

If you own an apartment in New York City or in any other major metro area, you probably own it as a co-op. The way you own an apartment as a co-op is two-step:

• You own shares of the corporation that owns the building and
• the corporation “rents out” your own apartment back to you.

That’s right, the co-op building in which you live rents out your apartment. To you.

The document which determines the landlord-tenant relationship between you and the management and the board of the corporation that owns your apartment building is called the proprietary lease.

You probably have many questions. What is a proprietary lease? How does it work? What does it look like?

Proprietary Lease Means You’re at the Mercy of the Board

Unfortunately for you, you are in many ways, essentially a tenant in your own apartment. The proprietary lease gives the management of the co-op the right to evict you. The board can use a number of reasons to evict you, for example, if you don’t pay the maintenance or the assessments or violate one of the co-op management’s restrictive rules. So not only are you in many ways a tenant in your own apartment, the fact that you have a proprietary lease means that you can also be evicted from your own apartment.

Want to transfer your apartment to a trust or put one of your children on the “deed?” Your proprietary lease probably has a language requiring you to get the “transfer of ownership” approved by the management and the board.

You are Also at the Mercy of the Bank

This is in addition to the fact that you will also need the transfer to the trust approved by the mortgage company. The way mortgages work in proprietary leases is that the bank that holds the mortgage has a mortgage lien on your shares of the corporation that owns your building, recorded in a central mortgage system and recorded with your apartment’s management. So before you transfer your shares and proprietary lease to a trust for yourself or add a name to the “deed,” you will need the bank’s approval. Otherwise, the bank that holds your mortgage may have the right to “accelerate” the mortgage and foreclose on your apartment even though you’re making mortgage payments.

You can see how you, in a way, get the worst of both worlds in a co-op with a proprietary lease. You can both be foreclosed on by the mortgage company and be evicted by your “landlord,” the coop management. But that’s how apartment ownership is set up in New York City, so we’ve all learned to live with it.

Problems with the Board or the Bank? Give me a Call

Give me a call if you have questions about your proprietary lease or are

• an apartment owner having issues with your coop management or board
• an apartment owner who is being evicted by the co-op management
• considering adding a name to a “deed” of a co-op
• having issues with the bank
• wish to include your co-op in your estate plan

My name is Albert Goodwin, and I have been handling proprietary lease issues for over a decade. We at the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected] .

Tel. 212-233-1233

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B4-2.3-03, Legal Requirements for Co-op Projects (09/04/2018)

Amendments to documents, co-op membership, lien position for co-op share loans, prior co-op financing, assignment of co-op’s lease/occupancy rights, co-op corporation’s recognition agreement, responsibilities, and lender’s rights, lender’s rights.

The co-op project’s documents must provide for the tenant-stockholders to have the right to amend them. In addition, the co-op corporation must be legally bound to notify the holder of a co-op share loan about any proposed material changes to the co-op project with respect to allocation of membership interests, voting rights, insurance coverages, and any other provisions that are for the express benefit of the lender.

The project documents must require that the sale or transfer of stock, shares, or membership certificates in the co-op corporation be in compliance with federal and state security disclosure laws. The documents also must require tenant-stockholders to own stock, shares, or a membership certificate, and permit the stock, shares, or membership certificates in the co-op corporation to be pledged and registered.

The project documents must give the tenant-stockholder a right to occupy the unit for a period that extends at least to the maturity date of the share loan, although this right should be subject to the terms and conditions of a proprietary lease or occupancy agreement between the tenant-stockholder and the co-op corporation. The documents also must prohibit the co-op corporation from imposing unreasonable limitations on the tenant-stockholder’s ability to sell, transfer, or convey their membership, or to sublease their unit. If the purchaser’s right to membership or occupancy is subject to any right of the co-op corporation to give approval, the lender must furnish evidence to clearly show that such approval has been given before Fannie Mae will purchase or securitize the co-op share loan.

The share loan must be secured by the assignment (in pledge or trust) of the borrower’s leasehold estate; a pledge or trust of the corporation stock, shares, or membership certificate; and any other documents that are appropriate under individual state or local laws and practices.

The lender that is financing the share loan must receive an assignment of the proprietary lease, occupancy agreement, or other similar evidence of the right to occupy the unit for all share loans that it delivers to Fannie Mae. The lender must also obtain a stock power, assignment, or other similar document that authorizes the lender to transfer ownership interest in the event of a default. Valid financing statements and assignments of financing statements must be executed and filed, if necessary to perfect Fannie Mae’s security interest under the Uniform Commercial Code of the state in which the property is located. Information searches or equivalent evidence of filing financing statements and assignments of financing statements must be obtained and must show that the Fannie Mae co-op share loan is in first-lien position. In those states in which co-op units are considered real property, perfection of the lien must comply with state law applicable to real estate.

The share loan must be a first-lien, except that, where custom dictates to the contrary, Fannie Mae will permit its lien to be subordinate to the co-op corporation’s lien against the tenant-stockholder’s shares for unpaid assessments that represents the pro rata share of the corporation’s payments for the blanket mortgage, current year’s real estate taxes, operating expenses or maintenance fees, and special assessments.

Note: The pro rata share of the project debt that is related to the co-op share loan cannot exceed 35% of the sum of the related pro rata share of the project debt and the appraised equity interest value of the shares. Lenders may use a higher ratio (not to exceed 40%) when there are fully documented compensating factors that justify using the higher ratio.

Fannie Mae will also permit its lien to be subordinate to any assignment of rents or maintenance expenses in any mortgage or deed of trust that is secured by the co-op project, or any Regulatory Agreement entered into by the co-op corporation and the Secretary of HUD as a condition for obtaining HUD mortgage insurance.

The co-op project must be in compliance with the requirements imposed by the holder of any prior financing for the project. If the blanket mortgage on a project includes a due-on-encumbrance clause and the project is located in a state in which share loans are considered to be an encumbrance on the project, the blanket lender must consent to the share loan financing. In the case of a conversion of an existing building, the blanket lender must agree to the use of the building as a co-op and, if it is feasible, agree—in the event of a default on the blanket mortgage—not to wipe out the shares of those tenant-stockholders who are current in the payment of their assessments or carrying charges.

Generally, the project documents should not permit the co-op corporation to restrict the sale, conveyance, or transfer of a unit owned by a lender, its successors, or assigns, nor to place any limits on the assignment of the proprietary lease or occupancy agreement to the lender, its successors, or assigns. This lease or agreement must be assumable by the lender if the tenant-stockholder defaults on the share loan. If the co-op’s organizational documents require that a tenant-stockholder be a natural person, they must permit the lender to select a non-corporate designee for any assignment of a proprietary lease or occupancy agreement that it acquires through foreclosure or acceptance of a deed in lieu of foreclosure. If the lender assumes the lease or agreement as the result of the tenant-stockholder’s default, the co-op corporation must allow the lender to attempt to sell its interest in the lease or agreement. However, if the lender is unable to effect a satisfactory sale within 60 days—either through its own efforts or with assistance from the co-op corporation—the co-op corporation may not prohibit the lender from subletting the unit.

The project documents may grant the co-op corporation the right to approve a lender’s sublessee or to offer an alternate sublessee that is satisfactory to the lender. However, the co-op corporation’s approval standards and procedures may not be unreasonably restrictive or in violation of applicable law, and the action must be completed within a reasonable time after the lender requests approval of a proposed sublessee.

The project documents must either require the co-op corporation to execute a separate agreement—such as a recognition agreement—or include provisions to recognize specific rights of the lender that finances the share loan (or those of its successors or assigns) and the co-op corporation’s responsibilities to that lender.

Co-op Corporation’s Responsibilities

The recognition agreement (or the project’s legal documents) must include, among other things, the following responsibilities for the co-op corporation:

The co-op corporation must evict a tenant-stockholder who has defaulted on their share loan and must terminate that tenant-stockholder’s lease, if the share loan holder requests it to do so.

The co-op corporation must be legally bound to notify the lender of any of the following changes or occurrences:

any threatened or actual condemnation, eminent domain proceeding or acquisition, or any actual loss, whether or not covered by insurance, that affects any portion of the co-op project or unit;

failure to maintain compliance with co-operative corporation eligibility under IRS Code Section 216;

any 30-day delinquency by the co-op corporation in payments due under any blanket mortgage for real estate taxes, assessments, and charges imposed by a government entity or public utility, or under any ground lease;

any lapse or cancellation of any insurance coverages maintained by the co-op project;

any proposed action that requires the consent of a specified percentage of eligible share loan holders; and

any 90-day delinquency by the tenant-stockholder that is related to the payment of their monthly assessments or carrying charges.

The project documents must grant the lender financing a share loan the right to cure the tenant-stockholder’s defaults in their assessment payments or carrying charges and the right to review and approve the following actions before the co-op corporation can consent to them:

any surrender, cancellation, modification, or assignment of any documents evidencing ownership, possession, and use of a unit;

any sublease of a unit;

any further or additional pledge or mortgage of any documents evidencing ownership, possession, and use of a unit;

any action to change the form of ownership of the project; or

the contraction, expansion, or termination of the co-op project.

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Originating & Underwriting

Selling Guide

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(Published: June 05 2024)

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• Copyright and Preface
• A1-1-01, Application and Approval of Seller/Servicer
• A2-1-01, Contractual Obligations for Sellers/Servicers
• A2-1-02, Nature of Mortgage Transaction
• A2-1-03, Indemnification for Losses
• A2-2-01, Representations and Warranties Overview
• A2-2-02, Delivery Information and Delivery-Option Specific Representations and Warranties
• A2-2-03, Document Warranties
• A2-2-04, Limited Waiver and Enforcement Relief of Representations and Warranties
• A2-2-05, Invalidation of Limited Waiver of Representations and Warranties
• A2-2-06, Representations and Warranties on Property Value
• A2-2-07, Life-of-Loan Representations and Warranties
• A2-3.1-01, Lender Breach of Contract
• A2-3.1-02, Sanctions, Suspensions, and Terminations
• A2-3.2-01, Loan Repurchases and Make Whole Payments Requested by Fannie Mae
• A2-3.2-02, Enforcement Relief for Breaches of Certain Representations and Warranties Related to Underwriting and Eligibility
• A2-3.2-03, Remedies Framework
• A2-3.3-01, Compensatory Fees
• A2-4.1-01, Establishing Loan Files
• A2-4.1-02, Ownership and Retention of Loan Files and Records
• A2-4.1-03, Electronic Records, Signatures, and Transactions
• A2-4.1-04, Notarization Standards
• A2-5-01, Fannie Mae Trade Name and Trademarks
• A3-1-01, Fannie Mae’s Technology Products
• A3-2-01, Compliance With Laws
• A3-2-02, Responsible Lending Practices
• A3-3-01, Outsourcing of Mortgage Processing and Third-Party Originations
• A3-3-02, Concurrent Servicing Transfers
• A3-3-03, Other Servicing Arrangements
• A3-3-04, Document Custodians
• A3-3-05, Custody of Mortgage Documents
• A3-4-01, Confidentiality of Information
• A3-4-02, Data Quality and Integrity
• A3-4-03, Preventing, Detecting, and Reporting Mortgage Fraud
• A3-5-01, Fidelity Bond and Errors and Omissions Coverage Provisions
• A3-5-02, Fidelity Bond Policy Requirements
• A3-5-03, Errors and Omissions Policy Requirements
• A3-5-04, Reporting Fidelity Bond and Errors and Omissions Events
• A4-1-01, Maintaining Seller/Servicer Eligibility
• A4-1-02, Submission of Financial Statements and Reports
• A4-1-03, Report of Changes in the Seller/Servicer’s Organization
• A4-1-04, Submission of Irrevocable Limited Powers of Attorney
• B1-1-01, Contents of the Application Package
• B1-1-02, Blanket Authorization Form
• B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns
• B2-1.1-01, Occupancy Types
• B2-1.2-01, Loan-to-Value (LTV) Ratios
• B2-1.2-02, Combined Loan-to-Value (CLTV) Ratios
• B2-1.2-03, Home Equity Combined Loan-to-Value (HCLTV) Ratios
• B2-1.2-04, Subordinate Financing
• B2-1.3-01, Purchase Transactions
• B2-1.3-02, Limited Cash-Out Refinance Transactions
• B2-1.3-03, Cash-Out Refinance Transactions
• B2-1.3-04, Prohibited Refinancing Practices
• B2-1.3-05, Payoff of Installment Land Contract Requirements
• B2-1.4-01, Fixed-Rate Loans
• B2-1.4-02, Adjustable-Rate Mortgages (ARMs)
• B2-1.4-03, Convertible ARMs
• B2-1.4-04, Temporary Interest Rate Buydowns
• B2-1.5-01, Loan Limits
• B2-1.5-02, Loan Eligibility
• B2-1.5-03, Legal Requirements
• B2-1.5-04, Escrow Accounts
• B2-1.5-05, Principal Curtailments
• B2-2-01, General Borrower Eligibility Requirements
• B2-2-02, Non–U.S. Citizen Borrower Eligibility Requirements
• B2-2-03, Multiple Financed Properties for the Same Borrower
• B2-2-04, Guarantors, Co-Signers, or Non-Occupant Borrowers on the Subject Transaction
• B2-2-05, Inter Vivos Revocable Trusts
• B2-2-06, Homeownership Education and Housing Counseling
• B2-2-07, First-Generation Homebuyer Loans
• B2-3-01, General Property Eligibility
• B2-3-02, Special Property Eligibility and Underwriting Considerations: Factory-Built Housing
• B2-3-03, Special Property Eligibility and Underwriting Considerations: Leasehold Estates
• B2-3-04, Special Property Eligibility Considerations
• B2-3-05, Properties Affected by a Disaster
• B3-1-01, Comprehensive Risk Assessment
• B3-2-01, General Information on DU
• B3-2-02, DU Validation Service
• B3-2-03, Risk Factors Evaluated by DU
• B3-2-04, DU Documentation Requirements
• B3-2-05, Approve/Eligible Recommendations
• B3-2-06, Approve/Ineligible Recommendations
• B3-2-07, Refer with Caution Recommendations
• B3-2-08, Out of Scope Recommendations
• B3-2-09, Erroneous Credit Report Data
• B3-2-10, Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report
• B3-2-11, DU Underwriting Findings Report
• B3-3.1-01, General Income Information
• B3-3.1-02, Standards for Employment Documentation
• B3-3.1-03, Base Pay (Salary or Hourly), Bonus, and Overtime Income
• B3-3.1-04, Commission Income
• B3-3.1-05, Secondary Employment Income (Second Job and Multiple Jobs) and Seasonal Income
• B3-3.1-06, Requirements and Uses of IRS IVES Request for Transcript of Tax Return Form 4506-C
• B3-3.1-07, Verbal Verification of Employment
• B3-3.1-08, Rental Income
• B3-3.1-09, Other Sources of Income
• B3-3.1-10, Income Calculator
• B3-3.2-01, Underwriting Factors and Documentation for a Self-Employed Borrower
• B3-3.2-02, Business Structures
• B3-3.2-03, IRS Forms Quick Reference
• B3-3.3-01, General Information on Analyzing Individual Tax Returns
• B3-3.3-02, Income Reported on IRS Form 1040
• B3-3.3-03, Income or Loss Reported on IRS Form 1040, Schedule C
• B3-3.3-04, Income or Loss Reported on IRS Form 1040, Schedule D
• B3-3.3-05, Income or Loss Reported on IRS Form 1040, Schedule E
• B3-3.3-06, Income or Loss Reported on IRS Form 1040, Schedule F
• B3-3.3-07, Income or Loss Reported on IRS Form 1065 or IRS Form 1120S, Schedule K-1
• B3-3.4-01, Analyzing Partnership Returns for a Partnership or LLC
• B3-3.4-02, Analyzing Returns for an S Corporation
• B3-3.4-03, Analyzing Returns for a Corporation
• B3-3.4-04, Analyzing Profit and Loss Statements
• B3-3.5-01, Income and Employment Documentation for DU
• B3-3.5-02, Income from Rental Property in DU
• B3-4.1-01, Minimum Reserve Requirements
• B3-4.1-02, Interested Party Contributions (IPCs)
• B3-4.1-03, Types of Interested Party Contributions (IPCs)
• B3-4.1-04, Virtual Currency
• B3-4.2-01, Verification of Deposits and Assets
• B3-4.2-02, Depository Accounts
• B3-4.2-03, Individual Development Accounts
• B3-4.2-04, Pooled Savings (Community Savings Funds)
• B3-4.2-05, Foreign Assets
• B3-4.3-01, Stocks, Stock Options, Bonds, and Mutual Funds
• B3-4.3-02, Trust Accounts
• B3-4.3-03, Retirement Accounts
• B3-4.3-04, Personal Gifts
• B3-4.3-05, Gifts of Equity
• B3-4.3-06, Grants and Lender Contributions
• B3-4.3-07, Disaster Relief Grants or Loans
• B3-4.3-08, Employer Assistance
• B3-4.3-09, Earnest Money Deposit
• B3-4.3-10, Anticipated Sales Proceeds
• B3-4.3-11, Trade Equity
• B3-4.3-12, Rent Credit for Option to Purchase
• B3-4.3-13, Sweat Equity
• B3-4.3-14, Bridge/Swing Loans
• B3-4.3-15, Borrowed Funds Secured by an Asset
• B3-4.3-16, Credit Card Financing and Reward Points
• B3-4.3-17, Personal Unsecured Loans
• B3-4.3-18, Sale of Personal Assets
• B3-4.3-19, Cash Value of Life Insurance
• B3-4.3-20, Anticipated Savings and Cash-on-Hand
• B3-4.3-21, Borrower's Earned Real Estate Commission
• B3-4.4-01, DU Asset Verification
• B3-4.4-02, Requirements for Certain Assets in DU
• B3-5.1-01, General Requirements for Credit Scores
• B3-5.1-02, Determining the Credit Score for a Mortgage Loan
• B3-5.2-01, Requirements for Credit Reports
• B3-5.2-02, Types of Credit Reports
• B3-5.2-03, Accuracy of Credit Information in a Credit Report
• B3-5.3-01, Number and Age of Accounts
• B3-5.3-02, Payment History
• B3-5.3-03, Previous Mortgage Payment History
• B3-5.3-04, Inquiries: Recent Attempts to Obtain New Credit
• B3-5.3-05, Credit Utilization
• B3-5.3-06, Authorized Users of Credit
• B3-5.3-07, Significant Derogatory Credit Events — Waiting Periods and Re-establishing Credit
• B3-5.3-08, Extenuating Circumstances for Derogatory Credit
• B3-5.3-09, DU Credit Report Analysis
• B3-5.4-01, Eligibility Requirements for Loans with Nontraditional Credit
• B3-5.4-02, Number and Types of Nontraditional Credit References
• B3-5.4-03, Documentation and Assessment of a Nontraditional Credit History
• B3-6-01, General Information on Liabilities
• B3-6-02, Debt-to-Income Ratios
• B3-6-03, Monthly Housing Expense for the Subject Property
• B3-6-04, Qualifying Payment Requirements
• B3-6-05, Monthly Debt Obligations
• B3-6-06, Qualifying Impact of Other Real Estate Owned
• B3-6-07, Debts Paid Off At or Prior to Closing
• B3-6-08, DU: Requirements for Liability Assessment
• B4-1.1-01, Definition of Market Value
• B4-1.1-02, Lender Responsibilities
• B4-1.1-03, Appraiser Selection Criteria
• B4-1.1-04, Unacceptable Appraisal Practices
• B4-1.1-05, Disclosure of Information to Appraisers
• B4-1.1-06, Uniform Appraisal Dataset (UAD) and the Uniform Collateral Data Portal (UCDP)
• B4-1.2-01, Appraisal Report Forms and Exhibits
• B4-1.2-02, Desktop Appraisals
• B4-1.2-03, Hybrid Appraisals
• B4-1.2-04, Appraisal Age and Use Requirements
• B4-1.2-05, Requirements for Verifying Completion and Postponed Improvements
• B4-1.3-01, Review of the Appraisal Report
• B4-1.3-02, Subject and Contract Sections of the Appraisal Report
• B4-1.3-03, Neighborhood Section of the Appraisal Report
• B4-1.3-04, Site Section of the Appraisal Report
• B4-1.3-05, Improvements Section of the Appraisal Report
• B4-1.3-06, Property Condition and Quality of Construction of the Improvements
• B4-1.3-07, Sales Comparison Approach Section of the Appraisal Report
• B4-1.3-08, Comparable Sales
• B4-1.3-09, Adjustments to Comparable Sales
• B4-1.3-10, Cost and Income Approach to Value
• B4-1.3-11, Valuation Analysis and Reconciliation
• B4-1.3-12, Appraisal Quality Matters
• B4-1.4-01, Factory-Built Housing: Manufactured Housing
• B4-1.4-02, Factory-Built Housing: Modular, Prefabricated, Panelized, or Sectional Housing
• B4-1.4-03, Condo Appraisal Requirements
• B4-1.4-04, Co-op Appraisal Requirements
• B4-1.4-05, Leasehold Interests Appraisal Requirements
• B4-1.4-06, Community Land Trust Appraisal Requirements
• B4-1.4-07, Mixed-Use Property Appraisal Requirements
• B4-1.4-08, Environmental Hazards Appraisal Requirements
• B4-1.4-09, Special Assessment or Community Facilities Districts Appraisal Requirements
• B4-1.4-10, Value Acceptance (Appraisal Waiver)
• B4-1.4-11, Value Acceptance + Property Data
• B4-2.1-01, General Information on Project Standards
• B4-2.1-02, Waiver of Project Review
• B4-2.1-03, Ineligible Projects
• B4-2.1-04, Environmental Hazard Assessments
• B4-2.1-05, Unacceptable Environmental Hazards
• B4-2.1-06, Remedial Actions for Environmental Hazard Assessments Below Standards
• B4-2.2-01, Limited Review Process
• B4-2.2-02, Full Review Process
• B4-2.2-03, Full Review: Additional Eligibility Requirements for Units in New and Newly Converted Condo Projects
• B4-2.2-04, Geographic-Specific Condo Project Considerations
• B4-2.2-05, FHA-Approved Condo Review Eligibility
• B4-2.2-06, Project Eligibility Review Service (PERS)
• B4-2.2-07, Projects with Special Considerations and Project Eligibility Waivers
• B4-2.3-01, Eligibility Requirements for Units in PUD Projects
• B4-2.3-02, Co-op Project Eligibility
• B4-2.3-03, Legal Requirements for Co-op Projects
• B4-2.3-04, Loan Eligibility for Co-op Share Loans
• B4-2.3-05, Geographic-Specific Co-op Project Considerations
• B5-1-01, High-Balance Mortgage Loan Eligibility and Underwriting
• B5-1-02, High-Balance Pricing, Mortgage Insurance, Special Feature Codes, and Delivery Limitations
• B5-2-01, Manufactured Housing
• B5-2-02, Manufactured Housing Loan Eligibility
• B5-2-03, Manufactured Housing Underwriting Requirements
• B5-2-04, Manufactured Housing Pricing, Mortgage Insurance, and Loan Delivery Requirements
• B5-2-05, Manufactured Housing Legal Considerations
• B5-3.1-01, Conversion of Construction-to-Permanent Financing: Overview
• B5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions
• B5-3.1-03, Conversion of Construction-to-Permanent Financing: Two-Closing Transactions
• B5-3.2-01, HomeStyle Renovation Mortgages
• B5-3.2-02, HomeStyle Renovation Mortgages: Loan and Borrower Eligibility
• B5-3.2-03, HomeStyle Renovation Mortgages: Collateral Considerations
• B5-3.2-04, HomeStyle Renovation Mortgages: Costs and Escrow Accounts
• B5-3.2-05, HomeStyle Renovation Mortgages: Completion Certification
• B5-3.2-06, HomeStyle Renovation: Renovation Contract, Renovation Loan Agreement, and Lien Waiver
• B5-3.3-01, HomeStyle Energy for Improvements on Existing Properties
• B5-3.4-01, Property Assessed Clean Energy Loans
• B5-4.1-01, Texas Section 50(a)(6) Loans
• B5-4.1-02, Texas Section 50(a)(6) Loan Eligibility
• B5-4.1-03, Texas Section 50(a)(6) Loan Underwriting, Collateral, and Closing Considerations
• B5-4.1-04, Texas Section 50(a)(6) Loan Delivery and Servicing Considerations
• B5-4.2-01, Native American Conventional Lending Initiative (NACLI)
• B5-4.2-02, Disaster-Related Limited Cash-Out Refinance Flexibilities
• B5-4.2-03, Loans Secured by HomePath Properties
• B5-5.1-01, Community Seconds Loans
• B5-5.1-02, Community Seconds Loan Eligibility
• B5-5.1-03, Community Seconds: Shared Appreciation Transactions
• B5-5.2-01, Loans With Resale Restrictions: General Information
• B5-5.2-02, Loans with Resale Restrictions: Eligibility, Collateral and Delivery Requirements
• B5-5.3-01, Shared Equity Overview
• B5-5.3-02, Shared Equity Transactions: General Requirements
• B5-5.3-03, Shared Equity Transactions: Eligibility, Underwriting and Collateral Requirements
• B5-5.3-04, Massachusetts Resale Restriction Loan Eligibility Requirements
• B5-6-01, HomeReady Mortgage Loan and Borrower Eligibility
• B5-6-02, HomeReady Mortgage Underwriting Methods and Requirements
• B5-6-03, HomeReady Mortgage Loan Pricing, Mortgage Insurance, and Special Feature Codes
• B5-7-01, High LTV Refinance Loan and Borrower Eligibility
• B5-7-02, High LTV Refinance Underwriting, Documentation, and Collateral Requirements for the New Loan
• B5-7-03, High LTV Refinance Alternative Qualification Path
• B5-7-04, High LTV Refinance Representations and Warranties
• B5-7-05, High LTV Refinance Pricing, Mortgage Insurance, and Special Feature Codes
• B6-1-01, General Government Mortgage Loan Requirements
• B6-1-02, Eligible FHA-Insured Mortgage Loans
• B6-1-03, Eligible VA-Guaranteed Mortgages
• B6-1-04, Eligible HUD-Guaranteed Section 184 Mortgages
• B6-1-05, Eligible RD-Guaranteed Mortgages
• B7-1-01, Provision of Mortgage Insurance
• B7-1-02, Mortgage Insurance Coverage Requirements
• B7-1-03, Lender-Purchased Mortgage Insurance
• B7-1-04, Financed Borrower-Purchased Mortgage Insurance
• B7-1-05, Government Mortgage Loan Guaranty or Insurance
• B7-2-01, Provision of Title Insurance
• B7-2-02, Title Insurer Requirements
• B7-2-03, General Title Insurance Coverage
• B7-2-04, Special Title Insurance Coverage Considerations
• B7-2-05, Title Exceptions and Impediments
• B7-2-06, Attorney Title Opinion Letter Requirements
• B7-3-01, General Property Insurance Requirements for All Property Types
• B7-3-02, Property Insurance Requirements for One-to Four-Unit Properties
• B7-3-03, Master Property Insurance Requirements for Project Developments
• B7-3-04, Individual Property Insurance Requirements for a Unit in a Project Development
• B7-3-05, Additional Insurance Requirements
• B7-3-06, Flood Insurance Requirements for All Property Types
• B7-3-07, Evidence of Property Insurance
• B7-3-08, Mortgagee Clause, Named Insured, and Notice of Cancellation Requirements
• B7-4-01, General Liability Insurance Requirements for Project Developments
• B7-4-02, Fidelity/Crime Insurance Requirements for Project Developments
• B8-1-01, Publication of Legal Documents
• B8-2-01, Security Instruments for Conventional Mortgages
• B8-2-02, Special-Purpose Security Instruments
• B8-2-03, Signature Requirements for Security Instruments
• B8-3-01, Notes for Conventional Mortgages
• B8-3-02, Special Note Provisions and Language Requirements
• B8-3-03, Signature Requirements for Notes
• B8-3-04, Note Endorsement
• B8-4-01, Riders and Addenda
• B8-5-01, General Information on Special-Purpose Legal Documents
• B8-5-02, Inter Vivos Revocable Trust Mortgage Documentation and Signature Requirements
• B8-5-03, HomeStyle Renovation Mortgage Documentation Requirements
• B8-5-04, Sample Legal Documents
• B8-5-05, Requirements for Use of a Power of Attorney
• B8-6-01, Authorized Use of Intervening and Blanket Assignments
• B8-7-01, Mortgage Electronic Registration Systems (MERS), Inc.
• B8-8-01, General Information on eMortgages
• B8-8-02, Requirements for Creating, Closing, and Correcting eNotes
• C1-1-01, Execution Options
• C1-2-01, General Information on Delivering Loan Data and Documents
• C1-2-02, Loan Data and Documentation Delivery Requirements
• C1-2-03, Ownership of Mortgage Loans Prior to Purchase or Securitization and Third-Party Security Interests
• C1-2-04, Delivering eMortgages to Fannie Mae
• C1-2-05, Bailee Letters
• C1-3-01, General Information on Remittance Types
• C2-1.1-01, Mandatory Commitment Process
• C2-1.1-02, General Information about Mandatory Commitment Pricing and Fees
• C2-1.1-03, Mandatory Commitment Terms, Amounts, Periods and Other Requirements
• C2-1.1-04, Mandatory Commitment Extensions and Pair-Offs
• C2-1.1-05, Servicing Fees
• C2-1.1-06, Accrued Interest Payments for Regularly Amortizing Mortgages
• C2-1.1-07, Standard ARM and Converted ARM Resale Commitments
• C2-1.2-01, Best Efforts Commitment Process
• C2-1.2-02, Best Efforts Commitment Pricing, Periods, and Fees
• C2-1.2-03, Best Efforts Commitment Terms, Amounts, and Other Requirements
• C2-1.3-01, Servicing Marketplace
• C2-2-01, General Requirements for Good Delivery of Whole Loans
• C2-2-02, Documentation Requirements for Whole Loan Deliveries
• C2-2-03, General Information on Whole Loan Purchasing Policies
• C2-2-04, Timing of Distribution of Whole Loan Purchase Proceeds
• C2-2-05, Whole Loan Purchasing Process
• C2-2-06, Authorization to Transfer Funds
• C2-2-07, Purchase Payee Codes
• C3-1-01, General Information About Fannie Mae’s MBS Program
• C3-1-02, Preparing to Pool Loans into MBS
• C3-2-01, Determining Eligibility for Loans Pooled into MBS
• C3-2-02, Selecting a Servicing Option
• C3-2-03, MBS Remittance Type and Selecting a Remittance Cycle
• C3-2-04, Mandatory MBS Commitments
• C3-3-01, Determining and Remitting Guaranty Fees
• C3-3-02, Accessing Buyup and Buydown Ratios and Calculating Payments or Charges
• C3-3-03, Buying Up and Buying Down the Guaranty Fee for MBS
• C3-4-01, Term-Related Fixed-Rate Mortgage Pooling Parameters
• C3-5-01, Creating Weighted-Average ARM MBS
• C3-5-02, Calculating the Weighted-Average Pool Accrual Rates for ARM Flex Pools Using a Fixed MBS Margin
• C3-5-03, Calculating the Weighted-Average Pool Accrual Rates for ARM Flex Pools Using a Weighted-Average MBS Margin
• C3-5-04, Pooling ARMs with a Conversion Option
• C3-5-05, Commingling ARMs in MBS
• C3-6-01, Parameters for Pooling Loans Into Fannie Majors
• C3-7-01, Establishing an MBS Trading Account
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• C3-7-03, Making Good Delivery
• C3-7-04, Delivering MBS Pool Data and Documents
• C3-7-05, Confirming Presettlement Information
• C3-7-06, Settling the Trade
• C3-7-07, Sale of Fannie Mae Securities to Third Parties
• D1-1-01, Lender Quality Control Programs, Plans, and Processes
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• D1-2-01, Lender Prefunding Quality Control Review Process
• D1-3-01, Lender Post-Closing Quality Control Review Process
• D1-3-02, Lender Post-Closing Quality Control Review of Approval Conditions, Underwriting Decisions, and Documentation
• D1-3-03, Lender Post-Closing Quality Control Review of Data Integrity
• D1-3-04, Lender Post-Closing Quality Control Review of Appraisers, Appraisals, Property Data Collectors, and Property Data Collection
• D1-3-05, Lender Post-Closing Quality Control Review of Closing Documents
• D1-3-06, Lender Post-Closing Quality Control Reporting, Record Retention, and Audit
• D2-1-01, General Information on Fannie Mae QC Reviews
• D2-1-02, Fannie Mae QC File Request and Submission Requirements
• D2-1-03, Outcomes of Fannie Mae QC Reviews
• D2-1-04, Identifying and Remedying Origination Defects Under the Remedies Framework
• E-1-01, References to Fannie Mae's Website
• E-1-02, List of Contacts
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• E-2-01, Required Custodial Documents
• E-2-02, Suggested Format for Phase I Environmental Hazard Assessments
• E-2-03, Revocable Trust Rider (Sample Language)
• E-2-04, Signature Requirements for Mortgages to Inter Vivos Revocable Trusts
• E-2-05, Servicing Marketplace — Mortgage Loan Servicing Purchase and Sale Agreement
• E-2-06, Correcting Errors in eNotes
• E-2-07, Description of eNote Header, Footer, and eNote Clause
• E-3-01, Acronyms and Glossary of Defined Terms: A
• E-3-02, Acronyms and Glossary of Defined Terms: B
• E-3-03, Acronyms and Glossary of Defined Terms: C
• E-3-04, Acronyms and Glossary of Defined Terms: D
• E-3-05, Acronyms and Glossary of Defined Terms: E
• E-3-06, Acronyms and Glossary of Defined Terms: F
• E-3-07, Acronyms and Glossary of Defined Terms: G
• E-3-08, Acronyms and Glossary of Defined Terms: H
• E-3-09, Acronyms and Glossary of Defined Terms: I
• E-3-10, Acronyms and Glossary of Defined Terms: J
• E-3-11, Acronyms and Glossary of Defined Terms: K
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• E-3-13, Acronyms and Glossary of Defined Terms: M
• E-3-14, Acronyms and Glossary of Defined Terms: N
• E-3-15, Acronyms and Glossary of Defined Terms: O
• E-3-16, Acronyms and Glossary of Defined Terms: P
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• E-3-25, Acronyms and Glossary of Defined Terms: Y
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What is a Proprietary Lease?

Different kinds of property contracts contain different types of terms. These terms govern the legal aspects of the sale, purchase, lease, and rent of that property. However, buying into a housing co-op is unique in many ways. One significant difference is that you do not own a specific home. Instead, you own shares in a corporation that owns all units. New York City is mostly co-op oriented, and there are up to 70% more co-op units than condominiums. 

As you do not own a specific unit, thus you need an agreement to use a particular unit. The name of this agreement is a proprietary lease. Before signing this agreement, you need to know "what is a proprietary lease" and how it works. This article will guide you through all you need to know about this type of lease. We will discuss the ins and outs of this type of lease with an example. 

What Is A Proprietary Lease?

Regulation laws do not consider a shareholder a tenant in a housing co-op. The reason is simple. They have no direct ownership of an apartment. Instead, they own shares in a housing co-op which in turn owns all units.

Thus, to allow the shareholder to occupy a particular unit, we need another contract. This contract defines how a shareholder can occupy an apartment. Moreover, it establishes the shareholder association with the co-op. Two primary documents govern the relationship between a shareholder and the housing co-op. The name of these documents is the "proprietary lease" and the "bylaws."

The bylaws are the governing rules for the whole building. It regulates the details of the cooperative corporation. For example, it might contain information on the corporation, like its organization, management, and board of directors. It also includes the election method and who can run for the co-op's board of directors. It has another document, sometimes called the "house rules," which the residents should follow.

We discussed how to deal with the whole housing complex. Yet, we still need a contract for individual units. A proprietary lease is a contract between the co-op shareholder and its board of directors. Some realtors also call this document an occupancy agreement. It governs all aspects of the relationship between both parties related to that unit. For example, it grants the shareholder the right to live in a specific apartment. Moreover, it defines the board of directors and shareholders' rights and duties. 

How Do Proprietary Leases Actually Work?

Buying shares in a co-op is not buying an apartment. What you get is literally shares of stock in a company. When you buy a house or condo, you get a deed. This deed assigns the right of that unit to you. However, you receive shares, not a specific home, when you buy shares.

Now, irrespective of the legal setup, people who buy shares in a co-op actually want to own a unit. Thus co-ops use the proprietary lease to allow the shareholders to have a unit. It is an agreement between the shareholder and the co-op board of directors. It gives the shareholder some rights to enjoy and obligations to fill. Similarly, the cooperative corporation can do its job efficiently.

Proprietary leases are usually active for a fixed period. Usually, they have a maturity time of 30 to 50 years. Therefore, this agreement clarifies many things. For example:

• Occupancy: It explains which shareholder is allowed to occupy which unit.
• Monthly Charges: Monthly bills and maintenance charges of the unit. You may be bound to pay even if you are not using that unit. Also, all shareholders have to pay for any extra expenses if needed.
• Sublet Options: Are you allowed to sublet the unit to someone else? If yes, on what conditions can you do it?
• Repair And Maintenance: Which types of repairs are the shareholder's responsibility?
• Mortgage Rules: Whether you can take out a mortgage or not. If yes, under what terms are you allowed to do it?
• Default Clause: What is a default on the lease, and what will happen in case of a default? Co-op can alter the house rules. The shareholder, their family, guests, sub-tenants, or employees should observe these rules. Breaching these rules will cause a default.
• Decent Living Condition: The owner can cook but should not cause disturbing smells. Similarly, they should not make loud noises or block public stairways or hallways.
• Lease Maturity: How long will this lease be effective?
• Right To Check: The co-op can always check a house if there is a reason to do so. The owner should share a key with them. They can break in at the owner's expense if needed.
• Termination: Under what conditions may the co-op cancel your lease agreement?
• Co-Op Duties: Duties of the co-op for keeping the building in good condition. Also, it includes details about any utilities included, like gas and water.
• Co-Op Indemnification: The co-op is not liable for any damage from the visitors. Thus, loss caused by guests, contractors, etc., is not their fault. Similarly, it is not accountable for shareholders' failure to comply with the lease.
• Account Inspection Right: Every shareholder can review the accounting books of the co-op with proper notice. Also, certified annual financial reports are available to them.
• Same Lease For All: Each shareholder signs the same agreement. Only the two-thirds majority can change the lease document. When that happens, all shareholders will have the updated lease.
• Mechanic's Lien: If a mechanic files a lien against a shareholder, it is against the whole building. The co-op will pay it without investigation and take the bill from the shareholder. It is sometimes challenging to fight the dispute, and starting a lawsuit might be the only option.
• Unit Possession: As the co-op owns each unit, it can take them back anytime. Usually, it happens when the shareholder violates the lease agreement. Also, the co-op can end the lease in other cases. For example, offensive behavior, bankruptcy, unauthorized occupancy, rent default, etc. 

An Example Of A Proprietary Lease In A Co-Op

As no shareholder is the actual owner of a house, a proprietary lease can give you many rights to enjoy. These benefits may not exist in other forms of house ownership, or it isn't easy to get them.

Suppose the lease document has a clause to grant the right to enjoy a quiet environment. The noise restrictions are usually stricter at night to allow peaceful sleep for everyone. If your neighbor is loud, you can file a complaint, and the co-op will check into the matter. The co-op board will determine if that neighbor violated the house rules, and that neighbor might face the consequences.

Similarly, suppose the neighbor above you has a leaky bathroom. If this leak drips through your ceiling, they have to repair it. Again, you can cite the maintenance terms when arguing with the board about the issue.

However, the co-op has limited responsibilities regarding repair. For example, if a pipe bursts in a wall, the co-op will repair it because it is their responsibility. Once the fixer restores the pipeline, the co-op will not paint the wall because they only have to return it to the paintable surface. Whether you have expensive wallpaper or simple paint, it is your duty to finish the job.

The Bottom Line: What Is A Proprietary Lease

• Let us review the answer to the question, "what is a proprietary lease." A proprietary lease does not mean you own real estate. That is why it is also called an occupancy agreement. Yet, it is an essential document for both the housing co-op and the tenants. Just as regular leases protect traditional landlords, proprietary leases cover the cooperative corporation. Similarly, it protects the shareholders by clearly outlining their rights and duties. This way, it gives peace of mind to the tenants and a solid structure to the working model of the co-op.
• Being a shareholder in a co-op is not the same as owning a condo. For example, in a condo, you own your unit. However, in the case of a housing co-op, the cooperative corporation owns all units. Thus, shareholders should thoroughly review their contract documents before finalizing their co-op apartments. You may need the help of a lawyer and an expert property dealer to understand it better. In case you are already living in a housing co-op, now is an excellent time to review this document in detail. This way, you will understand your rights and duties to the board of governors. If you need any help in this regard, please feel free to contact us now.

FAQs About Proprietary Lease

Here are some frequently asked questions related to a proprietary lease.

While both documents guide the co-op rules, the focus of the bylaws is what you are allowed to do with the property, like using common areas. However, the proprietary lease grants the right to live in a specific apartment.

It's a company just like other companies. Every person who has shares in a company owns a portion of that company. Shareholders choose the board of directors, and they run the company on their behalf.

The co-op can not extend the lease to a thousand years. There are reasons for that, and tax issues are one of them. Thus, they will extend it in the future to keep the maturity between 30 and 50 years.

How much is your home worth?

PROPRIETARY LEASE: Definition and How It Works

• by Peace Fred
• March 18, 2022
• 7 minute read

Table of Contents Hide

What is a proprietary lease, proprietary lease for a co-op apartment’s content, why can’t a co-op board renew proprietary leases for hundreds of years, bylaws vs. proprietary leases, in conclusion, proprietary lease faqs, why is a co-op lease called a proprietary lease, how long does proprietary lease remain effect in the corporate entity.

The majority of available residences in New York City are co-op, in which the shareholder’s residency in the apartment is governed by a legal instrument known as a proprietary lease. Before you sign a proprietary lease, here’s what you should know. This legal document will be discussed in depth in this essay.

A proprietary lease, also known as an occupancy agreement, grants a housing cooperative shareholder the right to occupy a certain dwelling unit. Homebuyers who join a co-op purchase stock in a corporation rather than real estate. When a homebuyer purchases a share in a co-op, they are also given a proprietary lease for their unit.

When a person purchases a co-op, she is not purchasing real estate. The property – an apartment building or other residential property — is owned by the cooperative corporation, and each co-op member holds a stake in the corporation. Co-op members are given shares of equity and a proprietary lease or occupancy agreement instead of a deed.

A proprietary lease governs all aspects of the co-relationship ops with each shareholder. It outlines the rights and privileges that come with a member’s residential unit, such as:

• Who is allowed to occupy a residential unit, and who has the right to sublet a unit
• Monthly maintenance fees in total
• The rules that regulate the sale of co-op shares
• The right of a shareholder to mortgage
• What is a shareholders default?
• Who is in charge of a unit’s maintenance and repair?
• The right of the co-op to terminate the lease

How a Proprietary Lease Works

Most shareholders are granted certain rights, such as the ability to sublet a unit in a cooperative apartment building and what normal proprietary lease paperwork will include (such as validation of a shareholder’s total number of shares).

The proprietary lease defines the cooperative’s core functions, including how the organization will manage the facility for the benefit of all persons who live there.

The following items are included in the lease (but are not limited to):

• Maintenance fees are made monthly.
• Bills are paid monthly.
• Service and repair methods
• Observance of local, state, and federal laws
• Inspecting shareholders’ apartments and providing advice on how to keep them in good condition

The proprietary lease also specifies the roles and responsibilities of the shareholders. It could, for example, cover repair and maintenance standards for a specific unit, such as paint, tile floors, light fixtures, and so on. It also covers the upkeep of building-owned equipment like windows and elevators.

In a cooperative apartment, the shareholder owns the apartment and is responsible for maintaining it and keeping it in excellent condition. If a shareholder wishes to renovate, the cooperative must grant formal consent. These guidelines protect the cooperative and its shareholders by requiring that all work within the building be performed by licensed and insured specialists.

Before signing the agreement, you should thoroughly review your proprietary lease. Before you sign, you should thoroughly grasp the co-tasks op’s and your responsibilities. It is important to note that co-ops do not provide tenants with ownership, which means that stockholders do not obtain a title or a deed.

A proprietary lease allows the owner to live in the flat he purchased. An owner owns stock. That proprietary entitles him to live in the apartment.

#1. A co-op apartment’s proprietary lease specifies how shareholders pay their monthly maintenance fees.

The proprietary lease specifies how each shareholder must pay maintenance costs (generally the 1st day of each month). This agreement also states that all shareholders are liable for their pro-rata share of any special assessments imposed by the co-op.

#2. Proprietary Lease specifies the co-op corporation’s responsibilities.

The proprietary lease informs each shareholder that it is the co-responsibility op’s to keep the building in excellent working order. This responsibility extends to communal areas (sidewalks, gym, hallways, stairways, elevators, etc.) It also discusses what utilities the HOA provides, which are often water and gas.

#3. Owners’ right to audit financial records

The co-op delivers certified financial reports to all shareholders on an annual basis. Furthermore, according to the proprietary lease, shareholders have the right to inspect the accounting records on any day they wish with proper notice.

#4. The lease is the same for all owners.

By definition, each proprietary lease is the same. The proprietary lease can only be updated with a majority of two-thirds of the owners’ shares. When that occurs, all shareholders will be given a new lease.

#5. The proprietary lease protects the co-op from any liabilities.

The cooperative is not accountable for any harm, loss, or expenditure caused by the shareholder’s failure to comply with the proprietary lease. The same restriction applies to everyone visiting the apartment, whether a guest or a contractor.

#6. According to the proprietary lease, breaking the home regulations constitutes a default.

The house rules can be changed or amended by the co-op. Those house rules are presented to the proprietary lease at the same time and are technically part of the proprietary lease. Shareholders must follow all house regulations and ensure that their family, guests, employees, or sub-tenants do as well. As a result, a simple violation of a house rule becomes a breach of the proprietary lease.

#7. Smell and sound

The owner can cook, but not without emitting offensive odours throughout the rest of the building. The owner is also not permitted to make excessive noise. Finally, the owner is not permitted to obstruct public halls or stairways.

#8. Shareholders automatically lose if a mechanic’s lien is filed.

If a mechanic’s lien is filed against the building. The owner must take care of it right away. This lien can be paid swiftly by the owner. If the owner fails to comply after receiving notification from the co-op, the co-op may deal with it directly, without conducting an investigation. The cooperative has the right to collect any and all payments made. Attorney’s costs, disbursements, and interest will also be charged to the owner by the co-op.

In short, if there is a disagreement with a contractor, the owner inevitably loses. For example, suppose a bad plumber comes by and doesn’t fix your in-unit boiler but still charges you $10,000 for “work.” If you dispute the plumber’s work, he or she may file a mechanic’s lien. Technically, the claim applies to the entire structure. As a result, the co-op will pay without further investigation. Then The payment plus any additional charges will be billed to the owner by the co-op. In every dispute with a contractor, shareholders essentially lose. It’s difficult to get that money back. The owner would have to file an appeal or a lawsuit.

#9. The co-op has constant access to your apartment.

Every owner is obligated to give the co-op a key. If the building’s super is unable to gain entry, they are permitted to conduct a break-in at the expense of the owner. However, in the event of an emergency, the co-op must provide you with reasonable notice and without notice.

#10. The co-op has the right to kick you out and repossess your unit.

If the shareholder breaks the proprietary lease, the co-op has the authority to re-enter the unit and remove all persons and personal goods. The lease will be immediately terminated if certain requirements are met, such as:

• Owner declares bankruptcy
• Unlawful subletting or occupancy
• Failure to make rent payments
• Other covenants are in default.
• Owner’s obnoxious behaviour

The board can rule that an owner’s or a visitor’s attitude is unacceptable. If the owner’s proprietary lease is not terminated after receiving a notification, the board may terminate it.

Will my proprietary lease be renewed by the co-op?

Yes, co-op boards will always remember to renew and extend the proprietary lease, usually before it reaches the 30-year mark. This is due to the fact that the lease that expires in less than 30 years would generate issues with many banks when it comes to extending purchase financing.

As a result, it is the co-op board’s fiduciary duty to remember to prolong the proprietary lease and to keep the expiration date more than 30 years in the future.

Remember that every shareholder has the most recent, up-to-date version of the proprietary lease, so no one can be singled out.

Even though it may appear convenient for a co-op board to extend proprietary lease hundreds or even thousands of years into the future so that they never have to remember to renew it, they do not do so because such a long lease period may be interpreted by tax authorities as a transfer of ownership.

This is not desirable because a transfer of ownership would necessitate the payment of NYS and NYC transfer taxes! This is why co-op boards will always preserve a proprietary lease with a period greater than 30 years, but not much longer.

Along with proprietary leases, bylaws govern how the co-op operates. The bylaws, on the other hand, take a broader perspective of a co-and op’s shareholders’ responsibilities. Proprietary leases are primarily concerned with the contractual relationship between each shareholder and the co-op, as well as each party’s rights and responsibilities.

Bylaws, for example, outline property administration, board member qualifications, and elections. House rules are also governed by bylaws. They include information on annual meetings, quorum (voting majority), director removal by a board, executive committee, and other committee regulations. Bylaws may also include information on the board’s duties and powers, as well as information regarding members and salary (meaning that directors may not receive compensation during their time on the board of directors).

Simply put, a proprietary lease is a contract. The co-op board is in charge of establishing policies and making decisions in the best interests of the co-op. These rules are then enforced through the use of a document known as a proprietary lease. Proprietary leases, also known as occupation agreements, divide the rights and obligations of the shareholders and the board of directors of the cooperative business.

Membership in a co-op has a few drawbacks. It’s also vital to understand that the proprietary lease provides the co-management op’s the power to evict you if you don’t pay maintenance fees or break a rule. Furthermore, when you invest in a co-op, you are not purchasing real estate.

Each co-op owner either owns shares in the organization, similar to holding shares in any other corporation or gets what is known as a “proprietary” lease. The lease specifies the owner’s rights and responsibilities, as well as the association’s obligations and duties.

A proprietary lease that is due to expire in less than 30 years may pose issues with potential lenders. As a result, the co-op board decides to prolong the lease in order to retain the maturity between 30 and 50 years.

What happens when a co-op proprietary lease expires?

When the lease’s expiration date approaches 25 or 30 years in the future, the co-op typically extends the term for many more years.

When the lease's expiration date approaches 25 or 30 years in the future, the co-op typically extends the term for many more years.

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What is a proprietary lease?

Some buildings just beg you to imagine what it might be like to live there. That one’s historical, even famous, with gorgeous turn-of-the-century architecture. This one’s new and fresh and so centrally located it’d revolutionize everything from your commute to grabbing dinner. Who owns these buildings, and who gets to live there? Are they condos, or are they co-ops? What’s the difference, anyway?

If you’re thinking of moving or buying for the first time, odds are you’re considering condos and housing cooperatives, or co-ops. On the surface, they seem very similar. Both are multi-unit structures, and both typically have a governing board in charge of managing the property as a whole as well as the community that lives there. Although living in a co-op and a condo are pretty similar experiences with many comparable pros and cons, what you’re buying into with each is significantly different.

When you buy a condo, you get a deed to the property. The “who” who owns that property is you, at least in part. But when you buy shares in a co-op, you don’t become the owner of real property. Instead, your money buys you a stake in the corporation that owns the property, and that stake typically comes with an occupancy agreement or proprietary lease. Yeah, kind of confusing.

Wondering if you should buy a co-op, the difference between a condo and a co-op, exactly what a proprietary lease is, and how owning in a co-op works? As experts in all things condos and co-ops – and in making sure people love the place they’re living in – we’ve got you covered.

How a Co-Op Works

Generally speaking, the more money you have, the more options you’ve got. But a co-op allows you to pay less to live in otherwise expensive areas. This makes them a popular choice for many looking to live that big-city life without an infinite budget. And then there’s curb appeal. Co-ops are also more likely to be located in atmospheric, historical buildings such as The Dakota and The Beresford. Having a stake in a place like that and getting to call it home has a real appeal, even if you don’t technically own a piece of it.

What you do own is the exclusive right to live in that place. And the more expensive a living unit is, the more shares you need to own in order to live there. Owning shares gets you a proprietary lease, which is a form of a residential lease. That means landlord-tenant law will govern the relationship between shareholders like yourself and the co-op.

This lease agreement lays out the details of the relationship between you and the corporation, outlining the privileges and rights associated with your residential unit, including:

• Your right to mortgage
• Whether pets are allowed in the unit
• What contractors you’re allowed to use for renovations
• Who’s responsible for fixing issues in the dwelling or building
• Rules regulating the sale of co-op shares
• What a default by a shareholder looks like
• Who is responsible for repairs and maintenance
• When the co-op has the right to terminate the lease
• Who may occupy the unit, including who has the right to lease out the unit

‍ Each housing cooperative has a set of board members, and they work together in the community’s best interest to outline these privileges and limitations.

Purchasing Shares in a Co-Op

Co-ops come in all shapes and sizes, and they also come in three main different types. Before you purchase one, find out what type of co-op it is. This will help you understand the market value of your investment. The three types include:

• Leasing Co-op. The corporation doesn’t build equity, and it leases the building rather than owning it.
• Market Rate Co-op. Members can buy and sell shares at the going market rate. ‍
• Limited Equity Co-op. The board sets limitations on the rate at which shares are bought and sold.

After you decide which type fits you best, it’s time to buy shares. To buy shares in a co-op, you can take out a share loan through a credit union. Share loans work like mortgages, but you are responsible for paying a pro-rata share of the common or maintenance costs of maintaining and running the building as well as the loan payments made to the lender.

These common or maintenance costs are typically paid to the corporation every month and are billed on an at-cost basis. They may or may not include real estate taxes and the property’s mortgage.

And we’re sorry to say that, just like nearly anywhere you live, you’ll also have to pay monthly utility bills and insurance costs.

Co-Op Mortgages

If you need to take out a mortgage on a co-op, that can be tricky. Most lenders won’t lend you a mortgage since they can’t physically obtain a mortgage for a property you don’t own. In contrast to a typical mortgage involving real property where the property itself is collateral for the loan, with a co-op mortgage, the collateral is the proprietary lease and the shares in the co-op corporation. That’s a little harder to quantify than physical property.

Fortunately, many large co-ops work with approved lenders from whom you can take out mortgages. If your co-op doesn’t have approved lenders and you can’t locate traditional lenders, you may have to find private lenders to take out a mortgage.

Note that many mortgages for co-ops may require large down payments that can range from 25% to 50%. Additionally, you may not get the best mortgage rates.

Leasing Requirements and Responsibilities of a Co-Op

No one likes a living situation where they’re drowning in fees, but co-ops work to keep things running smoothly for all. Yes, the co-op board sets community rules and property regulations, and you’ll be responsible for paying for your fair share. But this isn’t some evil conglomeration here to make your life harder. In fact, the co-op works to serve its shareholders, and it has a few obligations to you, too. Typically, you pay a monthly fee in exchange for some utilities, upkeep of common areas, and maintenance.

When you’re living in a multi-unit structure, you’re automatically part of a community. Though not all buildings feel that way, the good ones should. The board makes broad decisions about the property, and they’re also the ones who’ll decide whether you can buy in. Part of their job is building a strong community full of good neighbors and people you won’t feel weird about sharing the elevator with.

Compared to condos, co-op boards can be quite picky about whom they allow to purchase living units. If you want to purchase co-op shares, you’ll likely have to appear before the board. They’ll consider:

• Your character
• Your age, since some co-ops are only for people aged 65 or older
• Your profession, since some co-ops are looking for specific kinds of residents, such as artists, writers, or similar
• Whether you intend to occupy the dwelling unit for a specific period of time
• Whether you have the minimum gross income and financial status to qualify
• Your resident status, since some co-ops may only accept citizens

The board may also request your net worth, debt, tax returns, income, a background check, and character and employment references.

It’s a lot, we know. But on the plus side, the process helps ensure you’re moving into a community you actually want to be a part of! In contrast, condos don’t have interviews and only have the right of first refusal. This means they either have to approve your application to buy the unit, or the condo has to buy it themselves. And that makes it much easier to buy a condo than it is to take out a proprietary lease for a co-op.

Leasing Out a Co-Op and Adding Others to a Proprietary Lease

Leasing out a co-op and adding others to your proprietary lease may be less straightforward than it would be in a condo. The odds of getting a random six-month subletter while you take a half-year sabbatical upstate? Not great.

Because each co-op board sets up its own rules, whether you’re allowed to lease out your co-op residence will depend on where you own shares. If your co-op does allow you to lease out your unit, they’ll likely have firm rules about when you can lease it, to whom, and for how long.

For example, your proprietary lease agreement may require you to have lived in the unit for a specific amount of time (such as two years) before you can rent it out. This is even more likely in co-ops that assess your intent to live there as part of your application.

Even if you’ve met the minimum residency requirement to begin leasing, the co-op may still limit how often and for how long you can sublet. For instance, you may only be able to rent out your unit for three years out of every five years. Other housing cooperatives may allow you to extend your sublease term on a month-to-month basis.

Any potential renters will have to go through board approval in a process similar to the one buyers have to complete. Once your tenant is approved, you may have to pay fees to the housing cooperative, the managing agency, or both for subletting your unit.

Similarly, if you’re interested in adding someone to a proprietary lease or want to transfer your property to someone else, you’ll need your co-op board’s permission.

Check your proprietary lease contract for guidance. There should be a clause about getting board approval before assigning your lease and the corresponding stock to another person. However, there are some exceptions, such as transferring to a spouse or child.

Investing in a Co-Op or a Condo

In the end, the answer to the question “Is a condo or co-op better” really depends on what you’re looking for.

A co-op is generally a safe investment, but be sure to conduct background searches on the housing cooperative to make sure it’s well-managed, as you would with a condo, too. Since buying a co-op means buying market shares, just as with any stock investment, you don’t want to get involved in a company that may go bankrupt soon. If the company fails, you’ll lose your investment and your place to live – the opposite of a win-win.

Before deciding to get a proprietary lease, consider the limitations that come with buying a co-op. For instance, co-ops have lower liquidity than condos. The approval process for getting a condo is much less demanding, which makes getting condos on the market much easier. As a result, condos can be sold for a lot more. You might be able to buy in for less, but you might be leaving money on the table when it comes time to sell out.

Still, co-ops can be the right choice for some people. If you’re looking to live in a picturesque part of town or want to downsize, a co-op might be for you. Co-ops also let you put down roots more easily since co-op members won’t be asked to leave unless they go against the co-op’s rules. Just make sure to consider the following before deciding whether to buy a co-op:

• Ability to sublet or rent out your unit
• Ability to get a mortgage

Daisy knows co-ops and condos in and out.  As a property management company that strongly believes that every building is a unique ecosystem, we want to help board members and residents have exceptional living experiences in their buildings. If you’re interested in learning more about what we have to offer, check out our website .

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Understanding Your Proprietary Lease *

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[Note that the document being discussed is a legal document with legal ramifications, which should be thoroughly reviewed with your attorney before signing. I am not an attorney, but as a licensed Real Estate Broker in the State of NY with over 25 years of experience with co-ops, including as a former Co-op Board President for many years, I am sharing this information to raise awareness of the importance of this document, as it spells out the mutual obligations of the Corporation and the Shareholder. Please feel free to consult your attorney to verify any or all representations or suggestions made here, or regarding any additional information you may want to know with respect to this document.]

When you bought your apartment, you may or may not recall your lawyer needing to examine the document generally known as a prospectus, or sometimes referred to as the "black book" or the "offering plan." This document is a multi-page affair, often running well over 100 pages, which is drafted by the sponsor (the entity that is converting or constructing the cooperative) to meet the legal and organizational requirements of the State Attorney General's office with regard to the creation of a cooperative. This document contains a wealth of important information, including the original offering plan, initial engineer's report, original terms of sale, detailed description of the property, the Proprietary Lease, and the By-Laws of the new corporation. If you are currently an owner of a cooperative apartment, your lawyer likely spent some time explaining this document to you before or at the closing. And this document should have remained in your possession (if you don't have it, note that the document often ends up in the hands of the bank that provides the financing, or your lawyer may still have it in your file).

The two most important sections of this document for an owner to be familiar with are the By-Laws and the Poprietary Lease. The By-Laws are the rules by which the cooperative operates, explaining how it is organized, how it is managed and run, who can be on its board of directors, and how elections are to be held. The By-Laws includes a sub-document known as House Rules which contains specific rules of conduct for residents of the cooperative. The Proprietary Lease is the signed agreement between the corporation and its shareholder(s), which clearly spells out the obligations of each side in the relationship. This last document is the one I will elaborate on further now.

The Proprietary Lease explains the function of the corporation in providing a structure in good condition and maintaining it for the benefit of all the shareholders of the corporation. Those functions include collecting monthly maintenance, paying bills, contracting for repairs and services, ensuring compliance with local, state, and federal laws, setting policy, and in general acting in the best interests of all shareholders. In performing its functions, the corporation may delegate tasks or hire others to do tasks for the corporation.

Shareholders' responsibilities include the repair and maintenance of their private spaces, and all finishes and fixtures therein. This usually includes paint, carpet, tiles, wallpaper, hardwood floors, sinks, toilets, tubs, showers, and shower bodies. Shareholders are also responsible for routine maintenance to Corporation property within their private space: for example, keeping windows clean, or periodically checking/changing air valves on steam radiators.

A great deal of confusion exists on the part of many shareholders as to their responsibilities because many have no previous experience as homeowners. In a rental situation, the landlord, who owns the building, is responsible for many interior issues, such as bathroom fixtures, hardwood floors, etc, because the landlord owns these things, and is providing them for use by the renter as part of the rental fee. In a cooperative, however, the shareholder is the owner of the interior space and all of its finishes and fixtures, and is therefore responsible for them.

What a shareholder is NOT, is a "statuary tenant," that is, a rental tenant covered under conventional rent regulation statutes and laws. Because the shareholder is (indirectly as a shareholder in the corporation) an owner! The shareholder's relationship with the corporation is governed by the Proprietary Lease as well as business law that regulates corporations who operate for the benefit of their shareholders. Many former renters are confused about their new status as owners, and have an expectation that the corporation will act, or needs to act, like previous landlords they have had. There is usually a key paragraph explaining your responsibilities as an owner*.

It is not, contrary to popular belief, the job of the corporation to inspect shareholders' apartments and give advice and education to shareholders about needed maintenance in their apartments. It is the shareholder's job to take responsibility for what he/she owns and develop their own maintenance plan, much like one would have to do if one bought a house. The faucet is leaking? Call the plumber. While many co-ops periodically inspect apartments to check for violations, unreported leaks, etc, it is up to the shareholder to, for example, periodically inspect his/her bathroom tile for a need to grout or caulk. If a shareholder neglects to do what is necessary, and, for example, causes damage to corporation property due to this neglect, the proprietary lease allows for all such charges to be billed back to the shareholder. If the shareholder causes damage to another shareholder's apartment due to negligence, he/she is also liable for the damage. (This is the reason most co-ops require shareholders to carry insurance on their apartments.)

While the Shareholder owns the interior space, changing that space is another matter. If a shareholder wants to make changes in his/her apartment, he/she may need to alter something structural, change a service hookup, reroute pipes. All of these kinds of changes could affect the main structure of the building as well as its legal status. Therefore the corporation has an interest in the matter to protect the interests of all shareholders from situations that may endanger health of occupants, welfare of the building itself, or the legal status of the building. This is the reason the Proprietary Lease clearly requires written permission from the corporation for any renovations or alterations. Shareholders often object to having to file an Alterations Agreement, especially if work done in the apartment is minor (like just painting a bedroom). But the truth is, the corporation is not clairvoyant, and does not know what the shareholder intends to do as part of the renovation until it gets the application in writing. The process also protects the building (and all the shareholders) by requiring licensed and insured contractors who will follow safe work practices, and by providing for a security deposit in case building property is damaged.

A word about the Super. The super is employed by the corporation for specific tasks for the corporation. This does not include doing work in shareholders' apartments. There are many routine maintenance items that the super can help you with BUT, if you contact the super, and he does something for you that falls in the category of shareholders' responsibilities, you must pay him for his services.

It's a really good idea, if you haven't already, to read your Proprietary Lease so that you understand all of your obligations as an owner.

*Note: The author is not an attorney, and this article is not meant to take the place of legal advice. If you are an owner, and have never reviewed the contents of your particular proprietary lease with an attorney, I highly recommend that you do do so, at your earliest opportunity, for a complete understanding of your obligations to and relationship with your cooperative corporation.

When you buy a car, you expect good gas mileage with low upkeep, safe handling, and comfort inside. In other words, respectable performance. Why would you have any other expectations for a house?  The ability of your home to deliver comfort, health, and affordability is what a Home Performance Assessment is all about.  Is the home functioning at its optimum?  Or are there deficiencies and inefficiencies?  An assessment can often determine which cost effective items can improve the performance of your home most!

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PROPRIETARY LEASE: Definition and how it works

• by Emmanuel Akinola
• April 6, 2022
• No comments

When you buy into a co-op, the property becomes the property of everyone who lives there. A proprietary lease is a legal document that grants you the right to occupy a specific unit. Before signing on the dotted line of your lease agreement, it’s critical that you understand the intricacies of the proprietary lease that governs your co-op. So, what is a proprietary lease in real estate and its example? Before you sign a lease, here’s what you should know.

What is a Proprietary Lease

A proprietary lease is an agreement that grants co-op shareholders the right to live in a specific apartment space. Proprietary leases, also known as occupancy agreements, define the rights and responsibilities of shareholders and the cooperative corporation’s board of directors.

How A Proprietary Lease Works

Most shareholders are granted specific rights, such as the ability to sublet a unit in a cooperative apartment building and what a typical proprietary lease document will include (such as validation of a shareholder’s total number of shares).

The proprietary lease details the cooperative’s essential functions, including how the corporation will maintain the building for the benefit of all those who live there. The lease includes the following inclusions:

• Monthly Maintenance payments
• Monthly bills.
• Service and repair methods
• Observance of local, state, and federal laws
• Inspecting shareholders’ apartments and providing advice on how to keep them in good condition

The lease also specifies the roles and responsibilities of the shareholders. For example, it could cover repair and maintenance rules for a specific unit, such as painting, tile floors, light fixtures, and so on. It also covers the upkeep of building-owned items like windows and elevators.

Proprietary Lease Co-op

A proprietary lease is a signed contract between a co-op apartment owner and the co-op board of directors. In other words, the agreement governs the owner’s relationship with the cooperative. As a result, it governs the residency rules of co-op apartment owners. In the majority of our blog posts, we emphasize that the co-op apartment owner is only a “shareholder.” Shareholders receive two benefits:

• A stock certificate indicating how many co-op shares they own
• A lease allows each owner to occupy the apartment he “purchased” indefinitely.

This owner does not own his apartment directly, but only the co-op. The unit is not legally considered real property. The building is owned by this entity, also known as a “co-op” (the real estate itself). The shareholder is not considered a statutory tenant under NYC’s rent regulation laws . The proprietary lease, on the other hand, governs the relationship between the shareholder (or tenant) and the co-op. The lease also governs corporate business law in New York State. The law operates for the benefit of all shareholders. 

The distinction between a proprietary lease and co-op bylaws

The bylaws and the proprietary lease are both essential foundational documents. The condo or co-op offering plan includes both materials:

• The co-op bylaws govern the organization and management of the co-op. The bylaws highlight election rules and provide indemnification for officers and directors. Finally, they delegate authority to the co-op on behalf of the shareholders.
• The proprietary lease, on the other hand, focuses on the contractual relationship between each shareholder and the co-op. It establishes the owner’s and the cooperative’s rights and responsibilities.

Content of the proprietary lease for a co-op apartment

A proprietary lease allows the owner to live in the apartment he purchased. An owner has divulged. That proprietary entitles him to live in the unit.

The proprietary lease for a co-op apartment specifies how shareholders must pay their monthly maintenance fees.

The proprietary lease specifies how maintenance fees are to be paid by each shareholder (generally on the 1st day of each month). This agreement also states that all shareholders are liable for their pro-rata share of any special assessments imposed by the co-op.

The proprietary lease outlines the co-op corporation’s responsibilities.

The proprietary lease reminds each shareholder that it is the co-responsibility op’s to keep the building in good working order. This responsibility extends to common areas (sidewalks, gym, hallways, stairways, elevators, etc.) It also discusses what utilities the HOA provides, which are typically water and gas.

Owners have the right to inspect their accounting records.

The co-op provides certified financial reports to all shareholders on an annual basis. Furthermore, according to the lease, shareholders have the right to inspect the accounting books on any day they want with proper notice.

The lease is the same for all of the owners.

By definition, each proprietary lease is the same. Only a majority of the two-thirds of the owners’ shares can update the lease. When that happens, all shareholders will get the new lease.

The proprietary lease protects the co-op from any liability.

The cooperative is not liable for any damage, loss, or expense caused by the shareholder’s failure to comply with the proprietary lease. The same rule applies to anyone visiting the apartment, whether a guest or a contractor.

According to the proprietary lease, breaking the house rules constitutes a default.

The house rules can be changed or amended by the co-op. Those house rules are given to the lease at the same time and are technically part of the lease. Shareholders must follow all house rules and ensure that their family, guests, employees, or sub-tenants do as well. As a result, a simple violation of a house rule constitutes a breach of the proprietary leases.

An Example of a Proprietary Lease in a Co-op

Let’s consider a hypothetical situation as an example in which a shareholder might use a co-op proprietary lease to assert their rights.

Assume your proprietary lease includes a clause granting the right to quiet enjoyment. In your case against a noisy neighbor, you could cite the language in your lease. Your lease could say, “The lessee shall not permit or suffer any unreasonable noise in the building that will interfere with the rights of other lessees.”

Proprietary Lease Real Estate

A proprietary lease in a co-op is not like any other type of real estate lease. While a condo or single-family home involves a claim to real estate via a title or a deed, co-op ownership entails purchasing shares of stock in a cooperative apartment corporation as well as a proprietary lease for the specific apartment. A co-op apartment owner is a shareholder in an apartment corporation rather than owning proprietary lease real estate.

Board of Directors

A co-op, like any other corporation, has a board of directors. The board is elected by the shareholders, who are the owners of apartments in the building in the case of a co-op. As a result, the board of directors will include apartment owners. The board functions similarly to a corporate board and will typically include a president, vice president, treasurer, and secretary. They will be in charge of the co-op corporation’s operations, finances, rule enforcement, and a variety of other duties.

Board Approval

One distinctive feature of a co-op is the restriction on who can buy and occupy an apartment owned by the corporation. While there are few restrictions on purchasing a condo and none on purchasing a single-family home, a potential buyer of a co-op must seek and obtain the board of directors’ consent to purchase a unit in the building.

Maintenance Fees

Real estate taxes are paid by the owner of a single-family residence. A condo owner must pay real estate taxes as well as monthly common charges. According to the law, proprietary lease co-op apartment owners do not pay real estate taxes because they own personal property in the form of shares of stock in the co-op corporation. The co-op apartment owner, on the other hand, will be required to pay a monthly maintenance charge, which is a fixed fee that can be increased by a board of directors resolution. This fee is deposited into the co-op account and can be used for anything from general maintenance to repairs or capital improvements.

Title Insurance

Purchasers of real estate generally also purchase title insurance. Because ownership of a co-op apartment is not technically ownership of the real estate, there is no need to purchase title insurance. A co-op purchaser, on the other hand, has the option of purchasing leasehold title insurance, which insures the potential owner’s interest created by the proprietary leases. Leasehold title insurance typically protects against previously unknown liens affecting the co-op apartment.

Proprietary Lease Don’t Mean You Own Real Estate

The co-op board is in charge of establishing policies and making decisions in the best interests of the co-op. These rules are then enforced through the use of a document known as a proprietary lease. Proprietary leases, also known as occupancy agreements, divide the rights and responsibilities of the shareholders and the board of directors of the cooperative corporation.

Membership in a co-op has a few drawbacks. It’s also important to understand that the lease gives the co-op management the right to evict you if you don’t pay maintenance fees or break a rule. Furthermore, when you invest in a co-op, you are not purchasing real estate.

Proprietary Lease Example

An example of a proprietary lease specifies who is responsible for resolving issues in a co-op building. If a pipe bursts inside a wall, it is generally the responsibility of the co-op to open the wall and repair the pipe. However, it is not always the responsibility of the co-op to repair or replace the wall covering. The co-op will only make the wall paintable again. If you have expensive wallpaper on that wall, replacing it could be costly. This is a good example of a proprietary lease.

Frequently Asked Questions

What is a proprietary lease nyc.

A proprietary lease for a co-op apartment is the name of the contract between an owner (aka shareholder) and a cooperative corporation or co-op. The majority of the apartments in New York City are cooperatives. Indeed, the lease is one of the documents you will find within the co-op’s offering plan.

What document is needed to occupy one of a cooperative's apartment units?

A Master Deed is a fundamental document that establishes the existence of and governs the use and maintenance of a condominium property. In a cooperative, there are rules that cover common issues such as garbage disposal, maintenance, noise, and conflict resolution.

What would terminate a shareholders proprietary lease?

Typically, such termination can occur when a shareholder violates an important aspect of the lease, such as failing to pay monthly maintenance or other cooperative rules. In recent years, courts have permitted cooperative corporations to use this authority to cancel leases and, in effect, evict apartment owners.

What is an assignment of proprietary lease?

The specific agreement creates a first lien on and pledge of the Co-op Shares; the appurtenant Lease securing a Co-op Loan means Assignment of Proprietary Lease.

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How does a cooperative operate?

Operating a cooperative takes organization and cooperation. This resource is a guide to some of the basic functions of a co-op, including:

• Initial organization for new HDFCs or HDFCs getting back on their feet
• By-laws of the cooperative, including provisions for meetings and rules for directors and officers
• The proprietary lease, including maintenance, repairs, subletting, and enforcement
• Contracts with outside parties
• Apartment sales

Initial Organization

Planning for the operation of the cooperative must take place well before the formal transfer of ownership to the shareholders. The sponsor should be aware of the critical need to provide training in the operation of a cooperative to the new tenant-owners of the building.

After title to the property has been transferred to the cooperative, the legal organization of the corporation must be structured to insure that:

• the management of the building will be run on an orderly and fiscally sound basis; and
• the decision-making process will be based on a democratic foundation.

First Meeting of Shareholders

The initial legal step to achieve these goals is the first annual meeting of shareholders. The primary purpose of this shareholders’ meeting is the election of the board of directors. The board serves as the democratically-elected representatives of the shareholders. The board members are chosen for one-year terms, but the shareholders reserve the power to call special meetings to change directors. Each year, the shareholders must come together for a meeting to elect directors for the coming twelve months.

First Meeting of Board of Directors

Under the standard by-laws, the officers of the corporation (president, vice-president, secretary, and treasurer) are elected by the board of directors. For this reason, a meeting of the newly-elected directors should take place immediately or soon after the shareholders’ meeting. It is customary for the officers to be selected from among the members of the new board. Thereafter, the officers and directors are responsible for the day-to-day operation of the cooperative.

Responsibilities of the Board

One of the first legal responsibilities of the board is to make certain that all stock/share certificates and proprietary leases have been properly executed and distributed to the shareholders.

In the general operation of the cooperative, the directors are responsible for,

• preparing the annual budget
• fixing the monthly maintenance charges
• maintaining financial and other corporate records
• providing financial and other reports to shareholders on a regular basis
• collecting the maintenance charges from shareholders and rent from commercial tenants, if any
• paying the bills of the corporation
• hiring maintenance employees, managing agents and professional experts
• maintaining and repairing the common spaces, building structure and building-wide systems (electrical, plumbing, heating)
• approving apartment alterations and sub-leases
• supervising the sale of apartments and approving new members
• insuring compliance with income limitations and re-sale provisions and governing documents of the cooperatives
• enforcing shareholder obligations under the proprietary lease
• attending to any litigation involving the cooperative
• mediating disputes between shareholders

Rights and Obligations of Shareholders

The underlying rationale of a cooperative’s legal structure is to achieve a balance between the individual shareholder’s rights as the owner of his own home and the need to protect the interests and rights of the rest of the members.

Summary of Rights

As members of the cooperative, shareholders receive the right:

• to permanent, long-term occupancy of the apartment. The term is typically 99 years and can be renewed by the shareholders residing in the building when the proprietary lease expires.
• to sell their shares and assign their proprietary leases, subject to compliance with re-sale provisions and procedures and the consent of the board of directors.
• to make capital improvements and alterations in their apartments, subject to procedures and requirements of the lease and consent of the board.
• to use the shares and proprietary lease as security for loans, subject limitations outlined in the cooperative’s governing documents and the consent of the board.
• to sublet their apartments, subject to the limitations outlined in the governing documents and the  consent of the board.
• to participate in the affairs and operation of the cooperative through shareholder meetings and elections and through membership on the board of directors and/or committees.
• to take a pro rata share of the corporation’s real estate taxes and mortgage interest payments as personal income tax deductions, subject to the provisions of section 216 of the Internal Revenue Code.
• to receive annual financial statements and to inspect the corporation’s books and records.

Summary of Obligations

As members of the cooperative, shareholders have the obligation

• to pay the monthly maintenance or carrying charges as fixed by the board of directors.
• default in maintenance payments
• unauthorized sale, subletting or occupancy of the apartment
• objectionable conduct in violation of the house rules (i.e pattern of excessive noise at late hours which disturbs neighbors)
• to pay the cost of repairs and decorating (i.e. painting) within the apartment.

By-Laws of the Cooperative

The by-laws set forth the rules for governing the cooperative corporation. Except as mandated by law or controlled by provisions in the certificate of incorporation, the by-laws regulate most aspects of the corporation’s operation. The by-laws usually track the rules for conducting the affairs of a corporation set forth in the New York Business Corporation Law and may not contradict the provisions of this statute.

The explanations that follow of by-law provisions describe prevailing practices, but by-laws may vary in different buildings.

Specific Provisions of the By-Laws Meetings of Shareholders

The by-laws will describe procedures and requirements for conducting meetings of shareholders.

The key provisions include:

• Place of Meeting . At the cooperative or at such place specified in the notice of meeting.
• Annual Meetings . A meeting of shareholders must be held at least once per year for the election of directors. The by-laws must specify when the annual meeting is to be held.
• Special Meetings . Typically, By-laws will specify when and how special meetings may be called. Special meetings of shareholders may be called by the president, by the board of directors or by a specified percentage of shareholders (usually 10 percent).
• Notice of Meetings . By-Laws will specify how notice of meetings shall be given. For example, written notice of the annual meeting must be given personally or by mail to each shareholder not less than ten nor more than forty days before the meeting. Written notice of a special meeting also must state date, time and the purpose of the meeting. The attendance of a shareholder at a meeting without protesting the lack of proper notice shall constitute a waiver of the notice by that shareholder.
• Quorum . The definition of quorum will be specified. Usually, a majority of the shareholders, in in person or by proxy, will constitute a quorum.
• Voting . The general rule for HDFC cooperatives is one vote per household regardless of the number of shares owned by the shareholder, in order to have a more democratic representation.
• Eligibility to Vote . Any restrictions on voting eligibility will be included in the By-Laws. Many HDFC cooperatives for example, require shareholders to be no more than 2 months in arrears of their maintenance charges to be eligible to vote.
• Proxies . Most by-laws will permit a shareholder to appoint another person to vote at a meeting in his/her behalf. This appointment, known as a proxy, must be submitted to the corporation’s secretary prior to the start of the meeting and it must be in writing, signed by the shareholder, but need not be notarized or witnessed.
• call to order; determination of quorum
• proof of notice of meeting
• reading of minutes of preceding meeting
• reports of officers
• reports of committees
• election of directors (if annual meeting)
• unfinished business
• new business
• adjournment

Directors of the Corporation

The business of the corporation must be managed under the direction of its board of directors. By law, it is improper for the directors to defer corporate decisions to the shareholders. If an issue is particularly controversial, the directors may call a shareholders meeting to hear opposing arguments and to seek a consensus, but the determination of the issue must be made by a vote of the Board.

The key by-law provisions relating to directors are:

• Number and Qualifications. The number of directors must be specified (usually an odd number to avoid tie votes) and may not be less than three. Directors must be shareholders who are at least 18 years of age. Many cooperative by-laws provide that no more than one director may be elected from any one household or family.
• Powers and Duties. The Board must determine the cash requirements needed to operate the cooperative and must fix the monthly maintenance charges to be paid by each shareholder. The Board has the power to prescribe the manner of maintaining and operating the building. Every such determination will be final and conclusive as to all shareholders and any expenditures made by authority of the Board will be deemed necessary and proper.
• House Rules. The Board may adopt and amend such House Rules as it may deem necessary for the health, safety, convenience and enjoyment of the shareholders.
• Election of Directors. Directors should be elected at the annual meeting of shareholders and serve for a term of one year.
• Resignation and Removal. Any director may resign by delivering a written resignation to the office of the Corporation. Most by -laws provide that a director may be removed from office at any duly called regular or special meeting of the shareholders and a successor may then be elected to fill the vacancy. Vacancies resulting from the resignation or death of a director generally may be filled by a vote of the remaining directors until the next annual meeting of the shareholders.
• Regular and Special Meetings of the Board. Regular meetings of the Board may be held at such times as determined by the directors, but no less than four times per year. In most cooperatives, the Board will meet monthly, or more often, depending upon the decisions it must confront. Notice of a regular meeting must be given to each director personally or by mail or telephone at least two days prior to the meeting. Special meetings may be called by the President or by the request of ten percent of the directors on one day’s notice. At all meetings, each director shall be entitled to one vote.
• Quorum. A majority of the directors constitutes a quorum for the transaction of business.

Officers of the Corporation

The individuals responsible for the day-to-day functioning of the cooperative are the officers of the corporation. As is the case for most corporations, the officers of a cooperative are selected by the board

of directors, not by the shareholders. They are usually chosen from among those individuals who have been elected to serve on the board. Cooperatives may chose to hire managing agents to perform many of the tasks of operating a building, but the directors and officers are still the chief management officials. The key by-law provisions relating to officers are:

• Designation. The principal officers of the Corporation are the President, Vice President, Secretary and Treasurer and they must be shareholders of the cooperative.
• Election of Officers. The officers should be elected by the Board at the first meeting of the Board following the annual meeting of shareholders and hold office for one year terms. Officers may be removed by a majority vote of the Board.
• Duties of President and Vice President. The President presides at all meetings of the shareholders and of the Board of Directors. The president or vice president must sign all contracts, leases, mortgages and other instruments which are authorized by the Board. The president, subject to the control of the Board, has the general management authority over the affairs of the Corporation. In the event that the president is absent or cannot perform his duties, the vice president shall have the power to exercise the duties of president.
• Duties of Treasurer. The treasurer is responsible for the funds of the corporation and for depositing such funds in the Corporation’s bank account. He is responsible for keeping full and accurate accounts of all receipts and disbursements in the books of the corporation and for furnishing financial reports to the shareholders.
• Duties of Secretary. The secretary is responsible for maintaining the general files of the Corporation. He must keep the minutes of the meetings of directors and shareholders and is responsible for providing to shareholders and directors notices of meetings. The secretary also must maintain a record book containing the names of shareholders, numbers of shares owned, when acquired, price paid for the shares and other information needed to calculate the distribution of re-sale proceeds.

Fiscal Management of the Corporation

The by-laws contain basic procedures for maintaining the financial records of the Corporation.

• Books and Accounts. Books and accounts of the Corporation must be kept under the direction of the Treasurer in accordance with generally accepted accounting procedures.
• Auditing and Annual Reports. At the close of the year, the books and records of the Corporation must be audited by an accountant. (The hiring of a certified public accountant (CPA) for this purpose is recommended, but not required). Based upon the accountant’s report, the Corporation must furnish shareholders with an annual financial statement, including the income and expenses of the Corporation. The shareholders also are entitled to a statement showing each member’s pro rata share of real estate taxes and mortgage interest paid by the Corporation during the preceding year.
• Examination of Books. All shareholders have the right to inspect the books, records, documents and accounts of the Corporation, at reasonable times at the office of the Corporation.
• Signing of Checks. It is advisable for all cooperatives to follow the customary practice of requiring the signatures of at least two officers on all checks, usually the president or vice president and countersigned by either the secretary or treasurer. No officer should sign a check without knowing what expense the check is to cover.

Compensation of Directors and Officers

The vast majority of HDFCs provide that no compensation be paid to directors or officers for their services as directors and officers. No remuneration may be paid to a director or officer for services performed by them in any other capacity, unless a resolution authorizing such payment is approved by the board before the services are undertaken.

Transactions with Directors and Officers

The directors and officers are elected by the shareholders and owe a duty to act on their behalf.

Directors and officers should manage the cooperative in a manner that is free from even the appearance of self-interest. The by-laws should provide rules that must be followed to avoid accusations that directors acted for personal gain rather than for the benefit of the members. Typical provisions are as follows:

• Loans to Directors and Officers . Loans to directors, officers and shareholders are prohibited.
• Dividends. The Corporation may not pay dividends or distribute any of its income or profits to any of its shareholders, directors or officers. All funds received by the cooperative must be used to pay the expenses of operation, undertake capital improvements or to establish reserves .
• Contracts with Directors and Officers . Contracts between the Corporation and any director to provide services to the cooperative may only be valid if the board approves the contract without counting the vote of the interested director and full disclosure is made of the director’s interest in the transaction. In the alternative, the shareholders may authorize such a contract, if full disclosure is made.

Indemnification of Directors and Officers

In general, directors and officers of a corporation are not personally liable for claims involving the Corporation if the director or officer acted in good faith for a purpose he reasonable believes to be in the best interest of the Corporation. The by-laws may provide for the corporation to indemnify, or reimburse, such director or officer against personal judgments or claims arising out of the performance of his corporate duties. However, a director or officer may be personally liable if he performs his responsibilities in a negligent or unlawful manner. Most such situations involve loose supervision over or improper handling of the corporate funds.

Amendments to the By-Laws

The manner in which by-laws may be amended varies among cooperatives. Some provide that only the shareholders may amend the by-laws, while other buildings permit amendments by either the shareholders or directors, with the percentage of votes needed to approve an amendment ranging from a majority up to 75 percent.

The Proprietary Lease

The proprietary lease (or occupancy agreement) is the basic agreement between the cooperative corporation and each of its shareholders. The lease is long term, typically 99 years, and establishes the rights and obligations of the parties concerning the shareholder’s use and occupancy of the apartment. One master form is used for the cooperative, with the corporation and each shareholder signing an individual copy.

The explanations that follow describe the key provisions of a standard proprietary lease (also known as an occupancy agreement ), but cooperatives may amend these provisions to fit their needs.

Maintenance (Rent)

Each shareholder is obligated to pay the monthly charges, including late payment fees, as fixed by the Board. The Board also possesses the power to levy assessments upon the shareholders to pay for large capital expenses.

Services Provided by the Cooperative Corporation

The Corporation is required to maintain and manage the building and must keep the common areas properly cleaned and lighted. The Corporation is obligated to provide the apartments with basic services, such as heat and hot water.

The Corporation is required to keep in good repair the entire building, including the apartments and common areas, except those parts of the building that are stated to be the obligation of the shareholder. Repair responsibilities commonly imposed upon shareholders include the interior walls, floor and ceilings of the apartment (including painting), plumbing, gas and heating fixtures within the apartment, all appliances, such as refrigerators and stoves, and all lighting and electrical equipment in the apartment. The interior of the apartment may be looked upon as the shareholder’s own home and he/she is responsible for repairs within that home.

The line between whether the Corporation or the shareholder is responsible for a repair can sometimes lead to disputes. In general, the rule is that if you can see the pipe, equipment or fixture within the apartment, then the shareholder must maintain and repair it; if you cannot see the pipe, equipment or fixture, then the Corporation is responsible.

The Corporation has the right to make emergency repairs within an apartment if the shareholder refuses to do so and to charge the shareholder for the work.

Improvements and Alterations

A shareholder may not undertake major improvements or alterations within the apartment without first obtaining the written consent of the Board. The Board must have a valid reason if it decides not to give its consent. Improvements requiring consent generally include apartment alterations involving the water, gas, electrical and heating systems and pipes. The role of the Board is to insure that the planned project will not disrupt or cause damage to the building’s systems or structure.

Use of the Apartment

Most limited equity cooperatives require that the apartment be used as the personal and primary residence of the shareholder. The intention is to provide affordable housing for income eligible person or family, not as a vehicle for real estate investment. The shareholder may occupy the apartment with a spouse and other family members (typically defined as children, grandchildren, parents, grandparents, brothers and sisters). Many cooperatives permit the shareholder to live in the apartment with a roommate. Guests are usually permitted for up to one month periods, provided that the shareholder remains in occupancy.

Troublesome issues arise when a shareholder moves out, leaving the so-called “guest” behind in the apartment. If the Board has not approved such an arrangement, then the Board may declare this to be an improper sublet and seek to terminate the lease and recover possession of the apartment.

If the shareholder desires to sublet his apartment, he must obtain the written consent of the Board (or, if the Board refuses its consent, by approval of shareholders owning typically at least 2/3 of the stock). Any consent to subletting may be subject to such conditions as the Board may impose. In HDFCs, a Board might ask to see a copy of the sublease and require income verification to insure that the sublessee qualifies under the HDFCs governing documents . Most HDFCs only allow shareholders to charge 10% above the maintenance fee to sublettors.

Any assignment, sale or transfer of the lease and shares to the apartment must be approved in writing by the Board (or if the Board refuses, by the holders of typically 2/3 of the stock). The customary procedure is for the Board to interview the prospective buyer and check personal and employment references. The Board must request income verification and copies of tax returns to insure that the buyer is income eligible. In general, a cooperative Board has total discretion over whether to consent to a sale (as long as a disapproval does not violate any civil rights laws).

An exception to the general rule regarding Board consents involves what happens upon the death of a shareholder. If the shareholder is survived by a spouse, then no consent is needed for the lease and shares to be transferred to the spouse. (In many cases, the spouse may already be a co-owner of the shares.)

The transfer of the shares and lease to any other person requires the board’s approval, with the proviso that the Board may not unreasonably withhold consent to a financially responsible member of the deceased shareholder’s immediate family. This means that the Board must have a valid reason for denying approval of such person.

In deciding whether to give approval of a transfer of the stock and lease in the event of a shareholder’s death, the Board first must ascertain who is the rightful heir of the deceased. The Board cannot give approval to a member of the immediate family if another heir has the right to inherit the property. The Board should avoid becoming involved in a struggle between competing relatives. For this reason, the Board should request proof as to who may legally inherit the property, such as documentation from the local Surrogate or Probate Court.

Except in the case of a spouse, the right to inherit does not give the heir the right to occupy the apartment. In rejecting occupancy to a member of the deceased’s immediate family, the Board must provide a valid reason for its action. Illustrations of such reasons are:

• the applicant does not meet income guidelines
• a history of disruptive behavior as a tenant
• the applicant is not financially responsible as evidenced by a poor credit or employment record
• the applicant does not intend to use the apartment as his/her primary and personal residence.

If the heir does not wish to move into the apartment or is rejected by the Board, he/she is still entitled to benefit from the sale of shares to a third person. The heir has the right to receive from the sale whatever monies would have gone to the deceased shareholder, minus any maintenance arrears or other debts owed to the cooperative.

House Rules

The Board has the power to adopt House Rules regulating various conduct within the cooperative. The House Rules are incorporated in the Proprietary Lease and a breach of the Rules constitute a breach of the Lease. House Rules usually prescribe such matters as the manner in which garbage should be disposed of, restrictions on the playing of music or electronic equipment in a loud manner after 11 p.m., and the use of laundry facilities and public areas of the building.

Amendments to the Proprietary Lease

The terms of the Proprietary Lease may be amended by an affirmative vote of members owning at lease two-thirds of the shares of the cooperative. Items which are controlled by agreements with government agencies or by statutory provisions, such as low income re-sale provisions, may not be altered by the shareholders.

Enforcement of the Proprietary Lease

A cooperative Board must sometimes confront the serious issue of how to handle a shareholder who has violated the terms of the lease. This violation may take the form of failing to pay the maintenance on the apartment or non-financial matters such as unauthorized subletting of the unit. Since the defaulting shareholder is a part owner of the cooperative as well as a neighbor, this situation poses difficult problems for the Board. Most Boards will attempt to deal with the default with a letter from the directors, followed by a letter from the Corporation’s attorney if no progress is made. The directors may request that the shareholder meet with them to seek a resolution. If all efforts to resolve the issue fail, then the Board may have to turn to litigation. It must be remembered that the directors have a responsibility to protect the interests of all of the members of the cooperative. If a shareholder does not pay his fair share, then this impacts on all of the members. Below is a summary of the litigation options available to a cooperative Board in the case of a shareholder who is in violation of the lease.

• Non-Payment Proceeding . If the shareholder has defaulted in the timely payment of maintenance charges, then the cooperative (after service of proper notice to cure the default) can commence a non-payment action to evict the shareholder. The shareholder can terminate the proceeding by paying the past due rent, plus any late charges and legal fees, at any time before the issuance of a warrant of eviction.
• Hold-Over Proceeding . A difficult situation faced by cooperative boards is what to do about the shareholder who consistently pays his maintenance late. Chronic late payment of maintenance undermines the Board’s ability to pay its own bills on time. Non-payment actions are often not effective, because the shareholder can stop the proceeding by paying the arrears. An alternative procedure is for the Board to send the shareholder a notice that the lease is being terminated by reason of the shareholder’s history of late payments. The Board could seek to deem this conduct to be “objectionable” justifying a termination of the lease. If the problem is serious enough in a particular building, the shareholders should consider adopting an amendment to the proprietary lease declaring that a pattern of repeated late payments (e.g. five such payments within a 12-month period) constitutes separate grounds for termination of the lease. If the shareholder refuses to vacate the apartment after receiving a notice of termination of the lease, the Board may commence in court what is known as a hold-over proceeding, in that the shareholder is “holding-over” after the termination date.
• Hold-Over Proceeding . If the shareholder has violated the lease, the Board can seek to evict the member by sending a notice of termination of the lease and then commencing a hold-over proceeding. If successful, the Board may evict the shareholder and then sell the shares to the apartment.
• Injunction . If a less drastic step is called for, when, for example, the Board desires to remedy the breach but does not want to evict the shareholder, an alternative method is a court action for an injunction. This procedure can be effective in preventing an unauthorized alteration, sale or subletting of a unit or to gain entry to an apartment for needed repairs.

Contracts with Outside Parties

One of the responsibilities of the Board is to enter into agreements with outside parties to provide services for the cooperative. The most important of these contracts are agreements with contractors to undertake repairs and improvements and with management agents to provide management services for the building. Every contract entered into by the Board should describe clearly the scope of work to be performed, how much it will cost, how long it will take and the rights of the Board to terminate the agreement. The Board should always check references before it engages the services of an outside professional.

The Board may hire an outside company to manage the building, but it must be remembered that the Board and its officers still bear the primary responsibility for protecting and safeguarding the interest and financial assets of the corporation and its shareholders.

The following is a checklist of items to be covered in a management agreement, in the event the Board decides to engage an outside firm to render such services:

• cleaning and maintenance of the building
• hiring personnel, subject to the approval of the Board, to perform these services
• engaging contractors, subject to the approval of the Board, to make necessary repairs
• collecting and depositing in the corporation’s bank account the monthly maintenance charges
• paying the bills of the cooperative
• handling shareholder complaints
• complying with all building codes and clearing violations
• preparing and filing government, tax and employment forms
• Records . The Management Company should be required to maintain records in accordance with generally accepted accounting standards and procedures, showing income and expenditures and the assets and liabilities of the cooperative. The Corporation should have full right to inspect all of its records held by the Management Company, including checks, bills, invoices, and statements. The Management Company should provide the Corporation with monthly and yearly financial statements. The monthly statements should be supported by copies of documentation (canceled checks, bills, etc.).
• Bank Account . The Management Company should maintain a bank account on behalf of the cooperative and should provide the cooperative with copies of all records relating to the account (statements, cancelled checks, deposit slips, etc.).
• Insurance Coverage . Subject to the approval of the Board, the Management company should make certain that all insurance policies are current and are in sufficient amounts to properly protect the Corporation. The Management Company should promptly investigate and make a full written report regarding all claims against the Corporation.
• Compensation . The typical management fee ranges from between six to eight percent of the monthly rents collected. The Corporation should ascertain whether there are hidden fees not anticipated (e.g. the Management Company might seek to allocate building funds to pay the cost of its bookkeeper or other office personnel).
• Termination . The Corporation should possess the right to terminate the contract (with or without cause) on thirty days notice. Upon termination, the Management Company should be required to turn over all of its records in its possession belonging to the Corporation.

Apartment Sales

One of the Board’s responsibilities is the supervision and approval of re-sales of apartments. Below is a checklist of the legal documents involved in the sale of a unit.

• Contract of Sale . Entered into between the seller and purchaser, the contract of sale specifies the basic agreement between the parties: purchase price, when and where the closing or transfer of ownership will take place, financing arrangements, if any, and whether the contract is contingent on the purchaser obtaining a loan to buy the unit; what personal property and appliances will be included.
• Consent of Board of Directors . The Board must pass a resolution accepting the new shareholder and consenting to the sale. A written consent to an assignment of the proprietary lease and the shares of stock allocated to the unit is issued by the Board and presented at the closing.
• Assignment of Proprietary Lease . This document is signed by the seller to transfer his interest in the proprietary lease to the purchaser.
• Acceptance of Assignment . This document is signed by the purchaser to indicate his assumption of the seller’s obligations under the proprietary lease.
• Stock Power . This document is signed by the seller to transfer the shares allocated to his apartment to the purchaser.
• Recognition Agreement . If a bank or other institution is lending money to the purchaser to buy the unit, the lender will request the Board to sign a document known as a recognition agreement. Under this agreement, the corporation recognizes that a lending institution will hold a security interest in the shares and proprietary lease. By signing the document, the Board agrees to notify the lender in the event the purchaser defaults under the proprietary lease, affording the lender an opportunity to cure the default to safeguard its security.
• New Stock and Lease . The Corporation must issue a stock certificate and a proprietary lease in the name of the purchaser to be presented at the closing.

Related Resources

2022 area median income guidelines.

HDFCs are required to house people who are low-income. Different HDFCs have different eligibility definitions, or ways of determining who qualifies as low income. These are contained in the Certificate of Incorporation.

2021 Area Median Income Guidelines

What do income limits mean, how are they determined, and what are the income guidelines for 2020?

Sample Proprietary Lease

This is a sample of the proprietary lease of of an HDFC cooperative. Proprietary leases are part of your cooperative’s governing documents.