We have previously discussed the duties and obligations co-op and condo board members owe to shareholders and owners, but what information needs to be disclosed and how transparent should boards be? What information can shareholders and owners access and what is off limits? First and foremost, it is important for residents to know their rights.
Co-op shareholders have the right, pursuant to Section 624 of the New York Business Corporation Law (BCL), New York common law, and generally their proprietary lease, to inspect the corporate books and records. It has been held that co-op shareholders have the same legal rights to documents as shareholders in other public and closely–held corporations doing business in the State of New York. Therefore, co-op shareholders have the intrinsic right to protect their largest investment – their property. So what information generally must be disclosed to these shareholders? Documents such as meeting minutes, profit and loss statements, shareholder list, and accounting and bank statements. When requesting the board’s books and records, shareholders typically need to submit an affidavit confirming that they have not attempted to sell their unit in the past five years to avoid potential conflict.
Under the Condominium Act Section 339-w, condo owners have the right to examine the books of receipts and expenditures of the condo. The provision specifies that “[s]uch records and the vouchers authorizing the payments shall be available for examination by the unit owners at convenient hours of weekdays. A written report summarizing such receipts and expenditures shall be rendered by the board of managers to all unit owners at least once annually.” Recently the courts have applied the rights of shareholders to condo owners, whereby condo owners, who are acting in good faith, may retrieve documents such as “monthly financial reports, building invoices, board meeting minutes and legal invoices”.
However, there are limitations on shareholders’ and owners’ rights to inspect the books and records. Certain documents contain confidential information that should not automatically be disclosed. This problem often arises in regards to board meeting minutes. If a shareholder or unit owner requests access to minutes that contain confidential information, the board may be able to make redactions, particularly if the information is “embarrassing or prejudicial”. On January 1, 2018, Section 727 of the BCL will be in effect, which expands the scope of board transparency. Section 727 states that every condominium or cooperative housing corporation is required to submit an annual report to the shareholders including information of all contracts made, entered into, or voted on by the board, and the relevant details of those contracts. As statutes and common law evolve, it is important for boards to practice greater transparency so that they are in compliance with the law and avoid potential conflicts and litigation.
 Guzov, LLC. (May 4, 2017) “Guzov, LLC Protects Co-op Shareholders’ Right to Safeguard Investment through New York Supreme Court Ruling.” Available at: http://guzovllc.com/supreme-court-protects-co-op-shareholders-right-safeguard-investment/.
 Condominium Act Section 339-w. Available at: https://law.justia.com/codes/new-york/2010/rpp/article-9-b/339-w/. Accessed on Dec. 22, 2017.
 Odenthal, Mike. (Nov. 9, 2017) “How Transparent Should Boards Be” The Cooperator New York. Available at: https://cooperator.com/article/a-board-beholden/full#cut. Accessed on Dec. 22, 2017.
 BCL Section 727. Available at: https://www.nysenate.gov/legislation/laws/BSC/727. Accessed on Dec. 22, 2017.
Broadway Junction, home to several subway lines, will be the center of the next wave of economic and housing development in Brooklyn. What makes Broadway Junction so appealing to city officials and developers? It is in “a prime location at the cross roads of six neighborhoods and serves as the unofficial welcome center in a fast-growing part of New York City.” The combination of access to public transportation, low property costs and its proximity to Manhattan have attracted developers and investors. In addition, Brooklyn has the largest population in New York City with roughly 2.6 million residents, which provides “a strong local community that could serve as both workforce and customer base”. However, up until now the areas surrounding Broadway Junction have been overlooked due to the “long [struggle] with unemployment, poverty and crime.”
City officials (such as Brooklyn borough president, Eric Adams, and City Councilman Rafael L. Espinal Jr.) and NYC’s Economic Development Corporation (NYCEDC) have collaborated to incentivize development in the neighborhoods surrounding Broadway Junction. NYCED, determined to expand economic growth in East New York, are accepting proposals for the 300,000 square foot commercial office space, anchored by the Human Resources Administration. Through the Office Anchor Strategy, City agencies will be the tenants in these new developments to attract other businesses, while also spurring job growth. The President and CEO of NYCEDC, James Patchett, explains that “[b]ringing modern office space to East New York will help drive its continued growth as a job hub and bring hundreds of new private sector jobs to the neighborhood”.  These future developments will potentially create 100,000 “good jobs” in the next ten years.
The idea is to shift Broadway Junction from a transit hub to a business hub for both Brooklyn and New York City. As property prices increase in Manhattan, developers are hoping that the evolving neighborhoods attract residents and businesses, especially once the L train shuts down in 2019. City officials, cautious about gentrification, have rezoned 200 blocks for affordable housing. The City has also invested $267 million for parks, surrounding infrastructure, public schools, and $16 million to attract businesses and incentivize job growth. East New York’s greatest asset, which Manhattan lacks, is unused land. The collaboration of city officials, the NYCEDC, and developers is a promising sign that new development will spur economic growth and investment in the neighborhood. A local explains to the New York Times, “This neighborhood is ready for change. People are expecting it.”
 Hu, Winnie. (Nov. 27, 2017) “A Tried Brooklyn Transit Hub is Finally Getting Attention.” New York Times. Available at: https://www.nytimes.com/2017/11/26/nyregion/a-tired-brooklyn-transit-hub-finally-getting-attention.html?_r=0. Accessed on Nov. 29, 2017.
 NYCEDC. (June 22, 2017) “New York Works: NYCEDC Seeking Proposals for Commercial Office Space in East New York. Press Release. Available at: https://www.nycedc.com/press-release/new-york-works-nycedc-seeking-proposals-commercial-office-space-east-new-york. Accessed on Nov. 29, 2017.
 Op. Cit. n1.
 Op. Cit. n2.
 Op. Cit. n1.
Bryant Park, formerly known as Reservoir Square, has a long history in New York City from the square General George Washington’s troops “raced across” during the Revolutionary War, to New York’s Croton Distributing Reservoir and an “encampment for Union Army troops” during the Civil War. The Landmarks Preservation Commission made Bryant Park a Scenic Landmark in 1974 and today it is a sought after neighborhood for both businesses and residents.
Residential space around Bryant Park is becoming more popular. The area is seeing a significant shift as developers build new co-ops, condos and rental units. To meet the demand of more people in the area, there has been an influx of grocery stores (notably Whole Foods), restaurants, and amenities in the area. This is a substantial change from the abundant quick lunch spots and cafes for businesses in the neighborhood. The biggest attraction for new residents however is that they can typically walk to work and avoid traffic, while those who have to commute have access to the B, D, F and M lines.
“Unlike the blocks around Gramercy Park, Tompkins Square Park or even parts of Central Park, the area surrounding Bryant Park, a nearly 10-acre spread at West 42nd Street, between Fifth Avenue and the Avenue of Americas, has for a century been mostly a business district.”
Although Bryant Park is in Midtown amongst an ample amount of businesses, tourists, and currently Bank of America’s Winter Village, residents comment on the area’s tranquility. “When everybody goes home, and everyone takes their trains, there’s something really nice about the quietness of this neighborhood”. Developers predict that the neighborhood’s population will continue to grow due to its proximity to businesses and shops. Many businesses are in beautiful pre-war buildings, which will likely be converted into more residential units. This means that the value of property surrounding Bryant Park can see an increase over the next few years as development continues and demand strengthens. Today, the average price for a new apartment is $3.01 million.
So what should potential buyers expect in this flourishing neighborhood? The Bryant, located at 16 West 40th Street, has 57 residential units starting on the 16th floor of the hotel, with views looking out onto Bryant Park. The Bryant “is the first ever residential condominium built on Bryant Park and the first ground-up residential tower in the United States” designed by David Chipperfield. The condos are known for their floor-to-ceiling windows and luxury amenities. Although the area can be busy, the building advertises that its location has “the very best that NYC has to offer” from the arts to dining. Skyline Developers have also ceased an opportunity in the neighborhood and are developing ML House, a 62 unit apartment complex on 1050 Avenue of the Americas, which will be completed by next summer.
 Bryant Park. “History”. Available at: http://bryantpark.org/blog/history. Accessed on Nov. 8, 2017.
 Hughes, C.J. (Nov. 8, 2017) “Bryant Park: A Growing Neighborhood in Central Manhattan.” New York Times. Available at: https://www.nytimes.com/2017/11/08/realestate/living-in-bryant-park.html?rref=collection%2Fcolumn%2Fliving-in. Accessed on Nov. 8, 2017.
 The Bryant. “Overview”. Available at: https://www.thebryantnyc.com/the-bryant/#overview. Accessed on Nov. 8, 2017.
 The Bryant. “Neighborhood”. Available at: https://www.thebryantnyc.com/neighborhood/. Accessed on Nov. 8, 2017.
 Op. Cit. n2.
How does a co-op or condo board run smoothly when there are certain board members who are not residents of the building? Typically (especially in new or small buildings), co-op shareholders and condo owners are the primary residents of their units. However, there are also many “hybrid” buildings that continue to have rental units, units that are owned by the developers, or even “investor units”, which are purchased for the sole purpose of profit.
Buildings with rental units commonly occur when a co-op or condo is converted from a rental building and the residents do not choose to purchase their unit. Many of these tenants are protected under New York City’s rent stabilization regulations, who have the right to renew their leases and are “usually allowed to remain under a non-eviction plan”. These regulations were implemented in 1969 due to the rent increases in post-war buildings and continue to protect roughly one million tenants, however, they can be burdensome for co-op and condo boards who do not want non-resident board members.
Every co-op and condo’s by-laws will determine who can sit on the board. By-laws do not generally stipulate a residency requirement, however, if they do it would be clearly written in the building’s by-laws. The Business Corporation Law (BCL) of New York State, which governs co-op boards, also does not allude to a residency requirement under Section 701, but it does give boards the flexibility to “prescribe other qualifications for directors.”  Therefore, by law there is nothing stopping non-resident board members unless the co-op or condo decide to implement a narrower provision in their governing documents.
So what are the logistics of having a non-resident board member? Thanks to technology, it is now much easier for non-resident board members to participate in meetings through telecommunications such as FaceTime and Skype. However, the interests of residents and non-residents usually differ and can cause arguments amongst board members. Residents are more invested in the building and the way in which it operates – they have a long-term invested interest. Non-residents however, especially those who purchase units as an investment, are focused on profit, low maintenance costs, and aesthetics (for potential future sales). The combinations of unit ownership will impact how the building spends its money. To mitigate tension, board members should communicate their concerns effectively in meetings and also be open to compromise. If that fails to work, the building’s by-laws can always be adapted to serve the co-op or condo’s best interest.
 Sidranksy, A.J. (Nov. 2017) “Non-Resident Board Members.” The Cooperator. Avaliable at: https://cooperator.com/article/non-resident-board-members/full#cut. Accessed on Oct. 27, 2017.
 New York City Rent Guidelines Board. (Sept. 23, 2016) “Rent Stabilization FAQ.” Available at: http://www.nycrgb.org/html/resources/faq/rentstab.html#difference. Accessed on Oct. 27, 2017.
 New York Business Corporation Law, section 701. Available at: http://codes.findlaw.com/ny/business-corporation-law/bsc-sect-701.html. Accessed on Oct. 27, 2017.
On October 26, 2017 the Securities and Exchange Commission (SEC) announced that it would permit Wall Street thirty months to comply with new EU regulations regarding research rules.
MiFID, the Markets in Financial Instruments Directive (2004/39/EC), was enforced in the European Union in November 2007. “It is a cornerstone of the EU’s regulation of financial markets seeking to improve the competitiveness of EU financial markets by creating a single market for investment services and activities and to ensure a high degree of harmonised protection for investors in financial instruments.” MiFID II was adopted as a new EU directive on June 12, 2014 to “improve the functioning of financial markets making them more efficient, resilient and transparent.”
MiFID II, to be enforced by January 3, 2018, restructures the research requirements for all market participants, which also impacts U.S. brokers and investors. The SEC devised three “no-action letters” to give U.S. market participants guidelines on how to abide by both EU regulations and U.S. federal securities laws and help firms understand and implement the regulations. The SEC’s plan enables U.S. firm’s with clients in EU states to continue operating in the U.S. and for EU investors to have access to U.S. data and research. The SEC’s guidelines include the following terms and conditions:
“(1) broker-dealers, on a temporary basis, may receive research payments from money managers in hard dollars or from advisory clients’ research payment accounts;
(2) money managers may continue to aggregate orders for mutual funds and other clients; and
(3) money managers may continue to rely on an existing safe harbor when paying broker-dealers for research and brokerage.”
The new regulations will create greater transparency and efficiency as broker-dealers will have to receive research payments separately, instead of being bundled with other services. This will ultimately provide a new standard of research as it will “incentivize brokers to produce better quality research” and it will create fair price competition. However, Quinlan & Associates have reported that these new measures will cut up to $240 million in business for a number of international investment firms, although it will establish a more fair and transparent market on a global scale. Due to the EU regulation’s initial conflict with U.S. securities laws, the SEC has granted a thirty month relief. During this time the SEC will continue to monitor how research on the market is conducted and whether the provisions need to be altered in any way. The SEC is accepting comments from the public on this matter on their webform.
 European Securities and Markets Authority. “MiFID (11) and MiFIR.” Available at: https://www.esma.europa.eu/policy-rules/mifid-ii-and-mifir. Accessed on Oct. 27, 2017.
 U.S. Securities and Exchange Commission. Press Release. (Oct. 26, 2017) “SEC announces Measures to Facilitate Cross-Border Implementation of the European Union’s MiFID II’s Research Provisions.” Available at: https://www.sec.gov/news/press-release/2017-200-0. Accessed on Oct. 27, 2017.
 Price, M. (Oct. 26, 2017) “U.S. Securities Regulator Grants Wall Street EU Research Rules Reprieve.” Reuters. Available at: http://www.reuters.com/article/us-usa-sec-mifid/u-s-securities-regulator-grants-wall-street-eu-research-rules-reprieve-idUSKBN1CV1SK. Accessed on Oct. 27, 2017.
In the 1950s and 60s, mostly artists took advantage of New York’s abundance of commercial industrial and manufacturing buildings and transformed them into working/living spaces. Known for their high ceilings and spacious open floor plans, famous artists such as Andy Warhol moved into these buildings where the rent was low and they had the space to create. The problem? These spaces were not actually residential as they “lacked hot running water, and there was little in the way of local amenities.” So what contributed to the loft boom in New York City and made artists’ lofts in industrial buildings so desirable?
“They were just commercial spaces but what happened in American art was that abstract expressionism came along. Artists such as Jackson Pollock and Willem de Kooning moved art away from easel-sized painting to a grand format, and needed the large spaces, the ceiling height and the light to not only create their works but also to often live and work in the same space – sometimes illegally.”
These artists would rent their space to galleries who attracted affluent buyers who not only ended up purchasing the art, but also the spacious units. Soon the spaces artists loved became unaffordable due to the high demand. However, desirability is not the only factor that put these lofts out of reach for artists – new regulations implemented a series of obstacles for these tenants.
So what are New York’s loft laws and how have they developed? New York’s legislature implemented the New York City Loft Law in 1982, along with a Loft Board who regulate the conversions of industrial buildings to residences. The Multiple Dwelling Law, Article 7-C § 281 set out a new classification, interim multiple dwellings (IMD), which are commercial spaces lacking a certificate of occupancy. IMD’s required at least three families to occupy the building from December 1, 1981 to April 1, 1981 for it to be legally converted into residential spaces. These Loft Laws were later amended in 2010 and 2013 whereby at least three families occupied a commercial space for 12 consecutive months from January 1, 2008 to December 21, 2009. The new amendments also require all lofts to have at least one window that is 400 square feet, looking out towards a street, legal yard or courtyard, and is not in a basement or cellar or in a non-designated industrial business zone. Furthermore, for coverage applications (to convert their lofts into legal residences), the building space cannot be used for “certain activities that are inherently incompatible with residential use.” 
New Yorkers have been adamant for Mayor Bill de Blasio to address current loft laws that create more obstacles for loft residences. On June 15, 2017 the Loft Board held it will no longer “register buildings or accept new applications for coverage” which advocates are eager to extend along with eradicating the bar on certain activities. Lofts, which historically have been spaces for artists to live and work, are currently threatened under current regulations. Mayor de Blasio recently explained in a town hall meeting in Brooklyn that his administration will aim to protect “artists and cultural workers” along with providing adequate affordable housing. However, for this to be true, the administration will have to play an active role when discussing and developing regulations to meet residences’ needs.
The next New York City Loft Board meeting will take place on October 26, 2017 at 2:00pm at 280 Broadway, 3rd floor.
 Brooker, N. (Sept. 3, 2011) “New York’s long love affair with loft living.” Financial Times. Available at: https://www.ft.com/content/03c469e6-dfad-11e0-8e15-00144feabdc0?mhq5j=e5. Accessed on Oct. 25, 2017.
 Ib. per Lida Drummond.
 Multiple Dwelling Law, Article 7-C available at: http://www.nyc.gov/html/loft/downloads/pdf/loft_law.pdf.
 New York City Loft Board. Available at: http://www.nyc.gov/html/loft/html/home/home.shtml. Accessed on Oct. 25, 2017.
 The Real Deal. (May 18, 2017) “Loft-law reformers say de Blasio is MIA.” The Real Deal. Available at: https://therealdeal.com/2017/05/18/loft-law-reformers-say-de-blasio-is-mia/. Accessed on Oct. 25, 2017.
 The Real Deal. (Oct. 23, 2017). “De Blasio promises “big changes” to state loft law.” The Real Deal. Available at: https://therealdeal.com/2017/10/23/de-blasio-promises-big-changes-to-state-loft-law/. Accessed on Oct. 25, 2017. Per Mayor Bill de Blasio.
This year marks a devastating downturn for Chinese overseas real estate investments as it is predicted to fall 84 percent by the end of 2017 and a further 18 percent by 2018. What does this mean for New York’s real estate market? According to a Morgan Stanley report between 25 and 30 percent of real estate deals in New York are curated by Chinese investors. In 2016, out of the $33 billion invested into U.S. commercial property by Chinese investors, 43 percent went towards New York real estate projects.
Chinese regulators have cracked down on overseas investments from Chinese nationals with the aim of strengthening the country’s currency, economy, and encouraging investments in China’s economy. The regulations have capped the amount Chinese nationals can invest overseas, which not only obstructs investors’ freedom, but also has negatively impacted New York’s real estate market. Ultimately, these new regulations have hindered cash flow for many projects, leaving Chinese investors unable to close deals or even fulfill the EB-5 Visa requirements. Wendy Cai-Lee, head of the debt and equity fund Oenus Capital, told The Real Deal that the aftermath of such regulations “halted” some big deals and even prevented others going forward.
During President Xi Jinping’s first term, he implemented a number of economic reforms to bolster the economy, however, instead of working towards a free market with limited government intervention and greater international trade and investment, the country seems to be swinging in the opposite direction. China needs to spur investment within its borders, as Beijing and Shanghai’s real estate market has a large supply of empty or unfinished buildings and developers face high debt. However, is preventing investors from legally investing in overseas projects going to fix China’s looming problems?
In the view of President Xi, yes, as China’s biggest conglomerates (referred to as the gray rhinos) such as Anbang Insurance Group, Fosun International, HNA Group, and Dalian Wanda Group, who invest extravagantly overseas (especially in New York), “have borrowed so much that they could pose risks to [China’s] financial system.” The National Development and Reform Commission and the Ministry of Commerce have already created ripples in the market by scrutinizing potential overseas deals in an effort to narrow regulatory measures and prevent excessive capital outflow. The outcome? Anbang Insurance Group’s (who purchased New York’s Waldorf Astoria hotel for $2 billion) chairman Wu Xiaohui was detained by Chinese authorities and subsequently announced he was temporarily unable to fulfill his duties. The company questionably lost out on a deal to purchase the Starwood Hotels and Resorts Worldwide amidst a stock market crash in Shanghai and The Real Deal published that the conglomerate may be coerced by their government to sell the Waldorf and reinvest the funds back into the Chinese economy. This illustrates the beginning of the regulations impact on U.S. and New York real estate.
However, this does bring new players into the mix such as the Qatar Investment Authority which is funding the 1,428 feet tall 111 West 57th Street development, which is integrated into the Steinway Hall landmark. The commercial real estate company, CBRE Group predicted that because of negative interest rates, German and Japanese investors will have the opportunity to fill Chinese investors’ absence. Perhaps this drop in foreign investment in New York real estate will open the market for other nationals to dig deep into their pockets and finance big commercial real estate projects.
Shareholder activists “seek to engage and present well-thought out alternative courses of action … they have to persuade and win the votes and confidence of a majority of fellow shareholders and institutional investors in order to have any strategic impact.”
The second installment of Guzov, LLC’s Ami de Chapeaurouge’s study on shareholder activism is now available in the Hong Kong Lawyer. This series examines the frequency of local and international active investments in Hong Kong through a study of 50 different activist campaigns from 2003 to 2015, concluding that these activists make a “significant and quantifiable long-term value” to Hong Kong’s securities market. Furthermore, de Chapeaurouge discusses the role of passive investors in Hong Kong, which are notably large companies such as BlackRock, and the effective methods used by shareholder activists in Hong Kong’s public companies.
This article is the second of three installments. The next installment will be available soon.
The Landmarks Preservation Commission (LPC) is the agency charged with preserving New York City’s cultural and historical locations. The LPC takes great care in maintaining its protected sites, so if you want to renovate your property, you will likely run into a roadblock or two. Are you one of the lucky few to own a piece of New York history? If so, here are some key features of the Landmarks Preservation Commission, what the commission requires for renovations, and how best you can work with it to make the changes you want.
The LPC was founded in 1965 in response to public outcry from the demolition of the old Pennsylvania Station. The agency now consists of 11 appointed commissioners and about 70 other staff members, including preservationists, historians, architects, attorneys and administrative employees. The commission designates sites for preservation, usually buildings or districts, but sometimes natural locations (Central Park and Prospect Park are perhaps the most well-known of these). Most designations of individual buildings concern only the exterior, but sometimes interiors are designated landmarks as well (for example, the concourse of Grand Central Terminal). According to the LPC website, there are currently over 36,000 landmark designations in New York City.
To renovate a protected building, you must receive a permit from the commission. To receive a permit, you will have to submit an application describing the existing condition of the building and details of how you want to alter it, including drawing and a list of materials you plan to use. You will then submit the application, where it will be assessed by an LPC preservationist. You will likely need to meet with the preservationist to review the jobsite and discuss which type of permit is most appropriate for you. The LPC issues three basic types of permits: a Certificate of No Effect, which covers work not visible from the exterior of the landmark, but work that requires a Department of Buildings permit; a Permit for Minor Work, which encompasses work that effects the exterior of the building but does not require a Department of Buildings permit (like cleaning or window replacement); and a Certificate of Appropriateness, which covers external work that also requires a Department of Buildings permit. The first two do not require a public hearing before approval. For a Certificate of Appropriateness, however, a presentation must be given before the commissioners at a public hearing, reviewed by the LPC staff, and subsequently approved by the commissioners. There are also two additional types of permits: a FasTrack Service permit and an Expedited Certificate of No Effect Service for Interior Work. The FasTrack permit streamlines the replacement of windows and other standard, minimally visible features. The Expedited Certificate covers interior work largely for use in private residences.
The LPC is loath to alter the exterior of a designated building, but it will work in your favor if you can convince it that such changes are necessary for safety, or that they have been done on other landmarks. Additions to buildings are only allowed when they cannot be seen from any angle on the street. As Wayne Bellet of Bellet Construction Company explained in an interview with the Cooperator last year, “[The LPC] will ask you to build a frame and paint it orange….They will go to extreme street corners to see if it is visible by the eye. If it is…they will decline you.”
So if you want to renovate a landmarked building, how can you make working with the LPC easier? First, preparing a broad, all-encompassing proposal is vital. Daniel J. Allen of CTA Architects (which won an award in 2016 for its renovation of 36 Gramercy Park East) calls this his “master plan.” For example, “if I get a nice aluminum-clad wood window approved for a building on Park Avenue,” he says, “and that master plan goes in the file of the commission, the next time someone in that building wants to replace their windows, they simply have to send a letter referring to the master plan.” Second, mind the details and prepare in advance. “The [LPC] demands that any patch or replacement must look exactly as it did when the structure was first built,” Bellet says. “This includes jobs as small as replacing or re-caulking window sills to re-pointing the façade and replacing damaged brick, stone, and mortar.” Often it is difficult to obtain materials similar to those used at the time of construction, so parts sometimes must be custom-made, which can add tremendous time and expense. Finally, patience is a virtue. “When you look at the scope of what happens from the Department of Buildings’ point of view,” Bellet concludes, “it’s amazing anything gets built….Now you sprinkle on the top of it that the building is landmarked…it’s not going to happen tomorrow.”
The amount of shares a shareholder owns can be very significant. Shares reflect the value of you apartment, can be passed on to family members, transferred into a trust (depending on your building’s by-laws) or sold. They determine your voting rights and contribution of maintenance fees, and most importantly give you the right to live in your apartment in conjunction with the proprietary lease.
Co-op shareholders, unlike condo owners, do not own their physical unit. Shareholders own a portion of stock in the corporation, and the corporation owns the building. Shareholders then enter into a proprietary lease with the corporation which gives them the right to reside in their unit and the only ‘thing’ they have ownership over are their shares. Usually co-ops will comprise of hundreds of shares and those shares are allocated at the co-op’s inception and stated in the corporation’s offering plan. Similar to any other corporation, the board must submit the organizational documents (synopsis of the number of shares) with the attorney general.
Why does everyone have a different percentage of shares? Because every apartment is different depending on the lighting, views, the floor, and of course size. Units that are identical will typically have the same share value, unless one unit has extra perks. Two bedroom apartments are normally double the share value as one-bedrooms, and the penthouse will be even more. Shares are allocated based on the square footage of the unit and whether there is a balcony or private roof access. Your co-op board cannot determine the amount of shares randomly for each unit. They are held accountable by the Internal Revenue Service, which requires that shares have a direct and “reasonable relationship” to the value of the unit.
Shareholders are likely to get upset if they have been allocated more shares than someone else who has an identical apartment because this means the shareholder pays greater maintenance fees. If you give up a portion of your shares to reduce your maintenance fees, not only do you lose voting power but your proprietary lease and/or by-laws may require shareholder consent, which in reality is unlikely to happen. However, shareholders can increase their share value by purchasing a neighboring apartment. Occasionally co-op boards will increase the amount of overall shares (which has to be done by amending the by-laws) if the building expands by either taking over a neighboring building or creating residential units in what was previously commercial space.
Is there a benefit to having more shares? For shareholders who own two units or a larger unit there are financial benefits as the property will be worth more. The shareholder will also have greater voting power, which could be beneficial during shareholder meetings. Unlike buying shares in a public company, more shares in your co-op means paying higher amounts for the building’s operating costs and does not always make a significant difference.