—Confused Co-op Owner
“There are two questions raised by the reader and the answers to both depend on the language contained within the co-op’s operating documents; that is the offering plan and its amendments, the proprietary lease and bylaws,” according to Attorney Bryan J. Mazzola, Esq., a partner with the Manhattan-based law firm of Cantor, Epstein and Mazzola, LLP.
“Specifically, the first question is whether Owner “C” is a holder of unsold shares. Based on the information supplied, the answer is maybe since Owner “C” did not purchase directly from the sponsor. In particular, we do not know the terms of the proprietary lease and offering plan which likely set forth those conditions to be met in order for someone to be considered a holder of unsold shares, such as if the person must be designated by the sponsor and the time frame for doing so. It would also be helpful to have Owner “C’s” sales contract to determine whether Owner “B” made any representations in compliance with the governing documents to properly convey unsold shares or to see if it perhaps it issued a disclaimer stating that the shares were not to be considered unsold.
“The second question is that, assuming that Owner “C” is a bona fide holder of unsold shares, is he or she entitled to an exemption from paying the sublet fee. Again to answer this, one must look to the co-op’s proprietary lease and bylaws to determine in the first instance, whether the rental fee is authorized and if it wasn’t, whether the co-op’s board properly enacted an amendment to permit it to levy the fee. Additionally, assuming that the fee was authorized, holders of unsold shares are often given certain benefits within proprietary leases such as being exempt from rental fees. If the documents here do provide that benefit and if Owner “C” is a holder of unsold shares, than they would not need to pay the fee, even if all other owners were required to do so.”