Cooperative tenant's right: the flat you won't inherit

In the previous part of the series on limited rights in rem we wrote about the cooperative ownership right to premises — a right that can be sold, inherited and mortgaged, though without the full powers of an owner. Today it is the turn of its much weaker cousin, the cooperative tenant’s right to premises. This is a right many people confuse with the ownership one, and which in reality gives considerably less and can take a family by surprise at the worst possible moment: after the death of someone close.

Before we go further, a formal note. The Civil Code contains a closed catalogue of limited rights in rem and expressly lists the cooperative ownership right to premises, but does not list the tenant’s right. That is because the tenant’s right is of a different nature: it is a contractual right, arising from the agreement between the member and the cooperative and from membership itself, rather than a right in rem effective against everyone. We cover it in this series because in market practice and everyday speech it sits alongside the other rights to premises, but legally it belongs in a different drawer — and that, incidentally, explains why it is so heavily restricted.

What the cooperative tenant’s right to premises is

The cooperative tenant’s right to premises belongs to a person who is a member of a housing cooperative and has paid a housing contribution to it, that is a part of the cost of building the premises, usually far lower than in the case of the ownership right. In return the member obtains the right to use a specific flat, but it is a right of a personal character, tied closely to their person and their membership of the cooperative rather than to the premises themselves.

In practice lawyers compare it to a tenancy, only a tenancy on particular, cooperative terms. The holder may live in the flat, but cannot dispose of it freely in the way an owner does, or even the holder of the ownership right.

Why it is the weakest right to premises

The cooperative tenant’s right to premises is non-transferable. It cannot be sold, given away or transferred to another person in any other way. Nor can a mortgage be established over it, so it cannot serve as security for a loan, and a bank will never finance its acquisition, because formally there is nothing to buy. It is also not subject to enforcement, which on the one hand protects the occupant from losing the roof over their head, but on the other shows just how limited the right is. If an enforcement officer cannot seize it, that means it counts for very little in financial terms.

The most important difference, however, only reveals itself on the death of the holder — and it is this that most often takes families by surprise.

What the heirs inherit, given that they do not inherit the flat

This is the heart of the matter: the cooperative tenant’s right to premises does not form part of the estate. It cannot be inherited, because on the death of the holder the right simply expires. What is in fact inherited is the housing contribution, that is the claim for repayment of the value once paid to the cooperative. That is a monetary payment, settled according to the market value of the premises on the day the right expired — not the flat itself.

There is one important exception. If the right belonged jointly to both spouses, on the death of one of them the whole right passes to the other automatically, by operation of law. This, however, is not inheritance in the sense of succession law, but a separate rule laid down in the Act on Housing Cooperatives.

Apart from that exception, where the holder was a single person the right expires, and those close to the deceased — descendants, ascendants, siblings or a spouse — may within a year of the death apply to the cooperative to be admitted as members and to have a new right to the same premises established for them. This is not an automatic takeover of the deceased’s flat, however, but a fresh decision of the cooperative taken on application. If several eligible people come forward and cannot agree, the matter is decided by a court. And if nobody comes forward within the one-year period, the family is left solely with the right to the housing contribution, that is a repayment of money, usually far below the market value of the flat.

Tenant’s versus ownership right: two different worlds

Set side by side, the two cooperative rights look like distant relatives, though they are often mistaken for the same thing. The ownership right is transferable: it can be sold, given away, mortgaged and passed on under the ordinary rules of succession. The tenant’s right has none of these features: it cannot be sold, cannot be secured by a mortgage, is not subject to enforcement and, as we now know, does not form part of the estate. They also differ in the size of the contribution paid to the cooperative — lower in the case of the tenant’s right, because it covered only part of the construction costs, whereas the ownership right required the full costs to be met.

In practice this means the tenant’s right provides housing security during the holder’s lifetime but builds no wealth that could be passed on unchanged. It is a privilege of using the premises rather than an asset in the classic sense.

What is worth taking away from this

If someone in the family lives in premises held on cooperative tenant’s terms, it is worth knowing in advance — rather than only after their death — that the flat itself will not pass automatically to those close to them. Acting quickly matters: applying to the cooperative within a year offers a chance to have a new right to the same premises established, whereas missing that deadline turns a real chance of a flat into a mere claim for repayment of the contribution, usually far from the market value of the property.

Have you been left with a claim for a housing contribution instead of a flat, or is the family still trying to agree what happens to the premises after a relative’s death? Write to us. At Remedy we deal with exactly these tangled inheritance matters and will help establish what options you realistically have and how much you can recover from it.