Lot depends on where it is.... what's in the nabe, what's the 'buzz' of the place, when the other units sold...

Hi, just curious, why would you want to buy into a coop that is only 50% sold?

If you're even slightly motivated, I highly recommend introducing yourself to your new neighbors and discuss with them getting a board in place. My purchase in a very compromised building turned the sponsor-shareholder ratio to just over the 50-50 mark which by law allows you to have a "real" board. It's been extremely challenging to get any movement. Be prepared for the sponsor (aka powers that be) to be very reluctant to relinquish control.

Wow! Thank You to all of you for your responses. The co-op I am considering is still in the running but I saw another apt. in a more established co-op that I also like. Both are in the same neighborhood in Queens.
Since my first post, I've been reading through your topics and responses and have learned a great deal...it will assist me in making the right choice for me.
Again thanks to all of you!

Beware with bldgs that are less than 50% sold. Review the board minutes and confirm that the Sponsor and/or outside investors are not controlling the board. If they are I would not consider this to be a sound investment.

Another way to get a sense of whats going on in the bldg is to sit in the lobby and ask people who come in and out. Vet the information carefully.

Good Luck..

Don't be surprised if there AREN'T any board minutes to review. Hence, you may not be able to confirm anything. And yes, the Sponsor very well could be controlling the board, because s/he may BE, in essence, the board. While it's a pain in the ass, that's basically the natural progression in buildings like this... which is why as soon as the ratio flips to shareholder majority, it will be up to you and the intelligent people you meet to start investigating, and then beginning the evolution. Read your By-Laws (which may be unfortunately vague) to see how & when the voting in of a new board is expected to happen and hold the sponsor's feet to the fire. There are on-line sources to guide you, as well as the NYS AG's office.

If you decide to take a chance and purchase in this building (or anywhere you purchase), make sure you have your own excellent real estate agent (do not share the sponsor's) and your own real estate attorney. Get all agreements in writing. If it's a gut-renovated unit, look it over very carefully and request any fixes agreed to in writing. Do not rely on their good will, or in how nice they are. That all goes out the window when money is involved. If they promise you anything, get it in writing. Good luck.

We have to force our NYC Goverment to force this bill which is almost 10 years pending:
http://assembly.state.ny.us/leg/?bn=S00604&term=2011

Hey Anonymous,

Just becasue the Sponsor owns slightly less than 50% OR is required to relinquish control of the Board means absolutely nothing..

If a single shareholder controls, lets say 45% of the shares, the influence that large voting block of shares has is substantial. The Sponsor can easily control (indirectly) who wins and who doesn't. This is where the Attorney Generals requlations are quite weak.

I agree with another post who stated why would you buy in a bldg that is less than 50% sold..

Well it doesn't mean 'absolutely' nothing, because the law changes at that crucial 50-50 juncture. I was making the assumption (which may be incorrect), that this is a building which is changing over, and that no one shareholder owns that many apartments (e.g. 45% of the shares), OTHER THAN THE SPONSOR. And yes, the sponsor can be the devil incarnate.

The purchaser seems to be at the beginning of a search to buy an apt., learning things as they proceed. Asking them WHY doesn't answer the question they're asking, or provide any valuable information. While it's not an irrelevant question, I don't think it helps them unless you also provide the answer as to why you think it's not a good idea. So, perhaps you can take the time to tell them why you think it's a bad idea. Sometimes people will buy in a building like that due to price, or lack of board approval, etc.

I have lived in buildings that were less than 50% sold and ones that were 70%+ sold. There is a significant difference in terms of how the Coop is run. With Sponsor/Investors owning 50% of the shares/units the bldg is more transient. This results in a failure to feel like you live in a community or the ability to contribute to your investment.

The goals of each party are different; Sponsors/Investor have the ability to bypass the board review process and therefore can rent to any applicant which is generally determined by the rent. The resident shareholders have to deal with any problems as they live with these tenants. And what happens when you complain? In most cases nothing as the Sponsor has such a significant control on the board (with the block of shares they control) that they indirectly control the board.

Look you are not buying a pair of pants here. You are investing $10's of thousands of dollars. Why buy trouble??

It sounds like that complex is in transition between being sponsor controlled to being shareholder controlled. This is a great opportunity to start the co-op off right. Learn as much as you can - this site is a great primer. Encourage the sponsor to continue to sell units (not re-rent them). Don't let the sponsor blindly control the Board. Don't just sell to anyone - make sure they fiscally qualify. Save up for future repairs (repeat - save up for future repairs). The future is in your hands - run with it :)

To answer your question, the fact that the sponsor still owns more than 50% is not a risk by itself.
By "relatively new", do you mean recently converted or recently built ?

You should do your homework as a potential buyer and research the property's info a little. Have your lawyer request a copy of the proprietary lease, bylaws and financial statement of the coop.

If the building is in New York City, the city's website will give you a lot of information about it, like current and past violations, water charges, real estate taxes, have they paid all their dues on a timely manner.

It will help you get a broad picture about how the coop and the management are running the building.