Proprietary lease
A proprietary lease is the contract between a cooperative housing corporation and its shareholders that gives each shareholder the exclusive right to occupy a specific apartment. It's the document that turns owning co-op shares into the right to live in a particular unit, and it governs everything from sublet to alterations to default.
Frequently asked questions
How is a proprietary lease different from a regular lease?
A regular lease is between a landlord and a tenant who pays rent and has no ownership interest. A proprietary lease is between the co-op corporation and a shareholder who owns equity in the corporation; the 'rent' is maintenance, which funds the building's operating budget and the underlying mortgage. The shareholder has property-like rights, including the ability to sell their shares (subject to board approval) and to bequeath them.
Can the proprietary lease be amended?
Yes, but only by a supermajority shareholder vote — typically 66.67% or 75% of issued shares, depending on the certificate of incorporation. Boards cannot amend by resolution. Material changes (alteration rights, sublet, pet rules, flip tax) almost always require a properly noticed shareholder meeting and recorded amendment.
What happens if a shareholder defaults on maintenance?
The lease typically gives the corporation the right to declare the lease terminated for non-payment after written notice and a cure period (often 30 days). Once cancelled, the shareholder loses possession; the corporation can then market the shares and apply the proceeds against the debt. This is dramatically faster than the residential eviction process and is one of the reasons co-op lenders price loans favorably.
Where do I get a copy of mine?
Every shareholder received one at closing. The managing agent holds the master form; your transfer agent or attorney can pull a copy from your closing file. The text in force is the original lease as modified by every recorded amendment — make sure you have all of them.