Protocols and Procedures When a Shareholder Dies

While the death of a shareholder is a serious issue for boards of directors and their managing agents, the current COVID-19 crisis has greatly heightened the issue and this blog post is a brief outline of issues arising from the death of a shareholder and actions the cooperative can and should take.

Notification

When the cooperative learns of the death of a shareholder, it is important that as much information as possible is secured regarding the individual or individuals who are handling the deceased shareholder's affairs. This is of course much more important when there is only one shareholder of record.

The cooperative should ask for a copy of the death certificate, if available. At this point, an email or Xerox copy is sufficient although an original is always preferable. In addition, the full name, address, telephone number, and email address for the individual or individuals handling the estate should be secured. This is critically important as often times these individuals may be from out-of-state and once funeral arrangements are made may have far less interest in dealing with the estate. If the shareholder has a will, a copy of that should be secured as well, if possible. This will be more important in the long term as the estate is probated, but it does often evidence of who the executor is and is clear evidence of who is authorized to handle the shareholder’s affairs.

One important note at this point is that if the shareholder had a Power of Attorney granting an agent authority to act on their behalf, that document is no longer effective and cannot be used to handle the shareholder's affairs. Simply put, the Power of Attorney dies with the individual who grants it. This results in a period where no one is the actual legally appointed representative of the deceased shareholder and family members and or proposed executors are operating with apparent authority.

Death of a Shareholder in the Apartment

Even before the COVID-19 crisis, if an individual died in an apartment the apartment would be immediately sealed by the NYPD and no access allowed to the apartment until the seal is removed. As can be imagined this creates a number of difficulties, family members needing to get burial clothes, searches for important documents, and for the cooperative access to do required maintenance or repairs. Should the shareholder have died from COVID-19, there is an added layer of complexity as the apartment will have to be sanitized and quarantined for a period of time.

Even after the executor is formally appointed by the Surrogate Court and issued Letters Testamentary or in the case of an Administrator Letters of Administration, permission to enter the apartment must be secured from the local police precinct. In addition, to have the seal formally removed from the apartment also requires the consent of the local police precinct, which should be secured in some written form even if that is an email.

Access to Apartment

The death of the shareholder places the cooperative and its management in an awkward position vis-à-vis granting and control of access to the deceased shareholder’s apartment. Please note that the cooperative does not have a legal duty to seal the apartment or prevent access to the apartment to individuals who have a set of keys given to them by the shareholder, i.e., there is no affirmative duty to change the apartment locks even if requested by family members. If a family member or other individual with apparent authority requests the co-op change the locks for the apartment and does so in writing, the cooperative may change the locks and thereby limit access.

Immediately following the death of the shareholder, the period where no one is legally named as the representative, the cooperative should not provide access to the apartment to individuals who requested. The cooperative does have a legal duty to not give unauthorized access even to family members. The cooperative can however grant limited access to family members or others with apparent authority to enter the apartment for specific purposes, secure burial close and to look for a copy of a will or other authorizing documentation. In these cases, the access should be supervised, i.e., someone from management or the board should supervise the access and if any documents are removed from the apartment a copy of them should be made and held by the management office. No property or other valuable items should be removed; that should wait until the formal appointment of the estate representative.

Once an Executor or Administrator is appointed, they become the legal representative of the estate, i.e., they step into the legal shoes of the shareholder and are empowered to take actions on behalf of the estate. These actions include inventorying and removing property from the apartment, surrendering possession of the apartment for regulated co-ops or placing the apartment for sale if unregulated. There are some nuances to this process we would ask that you consult with our office to ensure compliance to various rules and regulations.

One preemptive action that the cooperatives can take is to ensure that shareholders' emergency contact information is current and up-to-date. Our recommendation is that this form has information both for family members and/or legal representatives as well as someone living in the cooperative so that there is a contact immediately available in an emergency. It is recommended that this information, especially for shareholders with special needs or who are elderly, be updated on a regular basis.

Please let me know if you have any questions or if we may be of further service during these trying times at dmroberts@norris-law.com. For other topics related to COVID-19, visit our Coronavirus Thought Leadership Connection.

The information contained in this post may not reflect the most current developments, as the subject matter is extremely fluid and constantly changing. Please continue to monitor this site for ongoing developments. Readers are also cautioned against taking any action based on information contained herein without first seeking advice from professional legal counsel.