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Board Talk: A Conversation About Renting

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Past Prez

Our co-op allows shareholders to rent out their units with yearly leases. The prospectus tells us how and what to do, etc. Now the board wants to do away with renting altogether, forever. They have put it in the new house rules. I should point out that the sponsor still has quite a few units, he will never leave this gold mine, and there is a moratorium that will end this year. Can the board do this?

Mark B. Levine

I’d have to see your proprietary lease to see what the exact provisions are, but the board typically has the ability to fully control the subletting rules within the cooperative. If the sponsor currently holds more than 10 percent of the building, taking away the extra rental units in the building actually helps the building since banks frown upon buildings that have too high a percentage of “investor units.” This can upset the ability to obtain mortgages or refinancing for both the cooperative corporation and the shareholders if the investor ratio is too high. The only way to change it is to elect a new board next year and revert the house rules to their pre-moratorium state.


Read your plan. Usually the subletting is controlled by the bylaws or proprietary lease, therefore requiring a super-majority vote to change. House rules are the day-to-day living regulations that control how shareholders live together in a sensible and collegial community. The board does not control this issue; the shareholders do. The board cannot change the proprietary lease or bylaws without a super-majority vote unless they conned the shareholders into allowing them direct control over rewriting the bylaws at will, which would have required a super-majority vote to obtain this power. While the authority is not impossible to obtain, I haven’t heard of any co-ops, except one, that was stupid enough to give it over to the board, thereby obviating the only control a shareholder group has over a runaway board.


Ditto what [dsi] says. The board cannot change the proprietary lease or bylaws without a special vote (usually super-majority) and a special meeting, with shareholders informed of the meeting and what it is about, mailed out in the time frame specified in [the] bylaws. The house rules do not cover subletting, but they [the board] can change the house rules as long as they are not self-dealing [or engaging in] other improper board conduct (like trying to get a better parking space).

My BOD [board of directors] did illegally change the voting, and I am trying to find a co-op lawyer for that and about 20 other things they have done against the proprietary lease, and, I would guess, with the non-proprietary lease subletting, about 40 years of unpaid sublease fees.

Also, they lie when they sell units, stating [the building] is 90 percent owner-occupied when it is around 50 percent or lower. I don’t know, since they refuse to abide by BCL [Business Corporation Law] 603 and provide me with an updated list of shareholders, another reason I need a lawyer. Worse, they won’t let me see the financials as allowed in the proprietary lease, and without a template of which court to file in, I am out of luck.

I figure there must be a lot of mortgage fraud since I don’t think banks will refinance the building when it is 50 percent [owner-occupied] and buyers usually cannot get a mortgage. One recent sale was a foreclosure, so the building board of directors and management company was involved in the sale. We need an agency in [New York State] for these co-op law violators; as I said in another post, it is a big scam with no oversight. The renters have much more juice on their side. You are better off with a zero-renters policy; however, in this housing and job market, if someone is underwater, they will easily walk away. The good news is, co-ops are better than condos [when you have] foreclosures. The co-op building gets made whole on back maintenance and fees first; the bank is next.

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