Unsold Shares in Co-op Buildings
Unsold co-op shares are a great way for investors to dive into the hot market that is New York real estate, while not subjecting themselves to the burdens that many board of directors present.
Before diving into their benefits, we must define what is meant by “unsold shares.” Unsold shares are shares of co-op buildings that have been allocated to apartments that have not been purchased for residential use. Until the shares are sold for such a purpose, the sponsor of the apartment or their purchasers who use the apartment for investment purposes retain the unsold stock shares.
The benefits of unsold shares vary based on specific offering plans and are further put into question by constant court litigation regarding the matter - they include:
Exemption from:
Board approval regarding prospective purchasers
In-unit renovations and improvements
Typical fees imposed upon tenant-shareholders such as transfer fees/flip taxes
Assessments for building repairs and improvements
Subletting rights at market rates with no fees
Veto power over governing document amendments and board decisions
It is critical to note that typical shareholders in co-ops with a high concentration of unsold shareholders could face a great financial burden. Because unsold shareholders are exempt from board assessments related to building improvements, board members will have no choice but to raise fees on tenant shareholders to pay for the repairs. Subsequently, tenants in buildings with many unsold shareholders will be responsible for more of the cost.
If you would like to learn more about unsold share units or how to navigate the complexities of co-ops, our team of legal professionals at the Law Office of Marc Scolnick, PC is ready to assist you. Call us today at (718) 554-6445 to schedule a FREE consultation!
Sources:
https://www.rockethomes.com/blog/home-buying/what-is-a-co-op
https://cooperatornews.com/article/holders-of-unsold-shares
https://www.habitatmag.com/Archive2/375-March-2020/Co-op-Battles-LLC-Over-Unsold-Shares
https://casetext.com/case/kensington-terrace-v-160-ocean-parkway-owners-corp/
This blog post is intended to provide information generally and to identify general legal requirements. It is not intended as a form of, or as a substitute for legal advice. Such advice should always come from in-house or retained counsel. Moreover, if this post in any way seems to contradict the advice of counsel counsel’s opinion should control over anything written herein. No attorney-client relationship is implied by this blog.