Holders of Unsold Shares Lessening Their Presence in Your Co-op

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.

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8 Comments

  • I and eleven others are the owners of a group of apartments in a 20 apt. building in Manhattan. We got into this as an investment back in 1986 and when the laws changed we couldn't get out as promised. We have finally agreed to sell and seem to be having trouble because of "unsold shares". Could you shed some light on this?? Thank you.
  • What are the tax consequences when a "Holder" who purchased unsold shares for investment purposes cannot qualify as a "tenant-shareholder"?
  • I am a family member of unsold shares of stock thru Harry Lecent Thomas my grandfather.
  • in a coop designated as HDFC, can shareholders be partial holders of unsold shares?
  • Finding an apartment with unsold shares in NYC is harder than finding a needle in a haystack. How can I buy one of these units? They are amazing apartments to purchase as an investment! Is there a list somewhere?
  • I'm an owner of unsold shares can I sell my co-op and transfer the unsold shares
  • Unsold shares in HDFC cooperatives in a fascinating question. In HDFCs unsold shares become the property of the Board, but I haven't heard of an instance where the Board paid maintenance or used those shares to cast a vote. I am presently writing a book on HDFCs. I will do some research on question and write with an update.
  • I am a new Managing Partner in a LLC that owns unsold shares in a coop in NYC, How long should it take to draft and file an Amendment with the city?