Slicing the Pie of Shares in a Co-op Is More Art Than Science

The allocation of shares in a housing cooperative is more art than science – even though it will have some very real influence on such things as the shareholder’s voting power and monthly maintenance payments. But what if the share pie gets sliced in a way that’s unfair?

The question became hugely relevant to a woman whose mother bought a co-op apartment in Manhattan in 1981. After her mother died, the woman discovered that an apartment on the same floor and of the same size as her mother’s carried a monthly maintenance that was $798 less. “What is my recourse?” the woman writes to the Ask Real Estate column in the New York Times.

“No two real estate professionals will allocate shares in the same way,” says attorney Phyllis Weisberg, a chairwoman of the co-op and condo law practice at Montgomery McCracken Walker & Rhoads. When a co-op is formed, a certain number of shares are allocated to each apartment. Factors going into the math include the size of the apartment, the floor it’s on, how much light it gets, the view(s), and other variables. Since some of these factors are subjective, it becomes difficult to prove that a decision was biased, unfair, or wrong. Furthermore, when a person buys into a co-op, he or she is not buying an apartment but, rather, an agreed-upon number of shares in a corporation.

“The question is similar to someone who discovers they overpaid on the purchase price of an apartment and now, years after the purchase, wants to go back and reduce the purchase price,” Weisberg says. Such price reductions are, of course, virtually unheard-of.

As a practical matter, reallocating shares raises thorny legal issues and tax implications for the building. A co-op has a finite number of shares. So if the dead woman’s estate relinquishes some of her shares, another person would have to take them, raising that shareholder’s monthly maintenance costs. Some proprietary leases require shareholder consent to make such a change. “And, needless to say,” says Weisberg, “it is unlikely they would consent.”