This truth may not be self-evident, but in a co-op all shareholders are not created equal. Virtually
every Offering Plan provides for a special class of shareholderscalled Holders of Unsold Shareswho are routinely granted privileges not enjoyed by the typical tenant-shareholder. If you're not familiar with this group of cooperators, now's the time to get acquainted. The more unsold shares there are in your co-op, the less clout you and other tenant-shareholders have.
Cooperators imbued with this exalted status are exempt from many of the most burdensome forms of board regulation, and such status confers a tangible financial boon. For example, Holders of Unsold Shares are not required to submit their prospective purchasers to the board for its approval, nor are they bound by the board's sublet restrictions. Holders of Unsold Shares are allowed to sublet their units at market rates in perpetuity. They're also exempt from paying sublet fees, alteration fees, transfer fees and flip taxes which may be imposed on the typical tenant-shareholder. Many Offering Plans give certain Holders of Unsold sharesi.e. Sponsorsveto power over some governing document amendments and management decisions of the board. Some Offering Plans even give sponsors disproportionate voting power in board elections. All of these factors result in a board of directors which is deprived of a substantial source of income and is stripped of its ability to control who resides in the building. In addition, the board is often unable to implement quality of life regulations which foster tenant-shareholders' interests.
Defining the Holder
In order to appreciate what factors permit someone to claim Holder of Unsold Shares status, you must fully understand the concept of Unsold Shares. These are shares of stock in a cooperative housing corporation which are allocated to apartments that have never been purchased for residential use. Once the apartment is acquired as a residence, the shares allocated to it cease to be Unsold Shares and its owner is not entitled to Holder of Unsold Shares status.