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Info: A sponsor can sell an apartment in a Coop without board approval or paying flip tax.
QUESTION: What is the legal defination of "Who is a Sponsor"?
SITUATION: Our building was converted to a CoOp about 17 years ago, but all apt were not sold. The original sponsor sold to investors, who were deemed sponsors, who sold to investors who were also called sponsors.
We recently had a mini converson, in that occupied apartments were once again offered to tenets, however most were sold to various "Sponsors".
One apartment has now been sold again, Sponsor to Sponsor, HOWEVER, we now find that the new Sponsor (who will not have to pay have board approval or pay a flip tax if they sell) is a couple that are moving in. They are not investors, but bought an apartment to live in. Our old Board Pres was doing people favors signing off on these sales, in hopes of getting reelected (he was not reelected)
HELP.............
I agree with RLM -- contact your attorney right away.
Chances are that your proprietary lease defines, very specifically, who is and who is not "the sponsor," and I don't expect you or me or Oscar the Grouch could become the sponsor just because the seller says so.
As the previous post says, typically one is the sponsor only if one holds "unsold shares."
If a holder of unsold shares (an investor) uses the apartment for their personal use...then they are no longer are legally entitled to holder of unsold share status. They, in effect, become regular shareholders subject to all covenants and fees and rules and regulations that all other shareholders are subject to.
Dave, Thanks for your answer. Where do you get your info.
The new "sponsor" (this is the fifth sponsor for this apt, and they dont own anyother apts) is letting her children live in the apt....
alice - if the "kids" are responsible and bills getting paid who cares if they are there? so what? sometimes, i hate coops.....
assume these are adult kids. whcih makes them adults, not kids.
You missed the Point: This apartment was sold as a Sponsor to Sponsor apartment. Making the new owner about the Sixth sponsor to own this apartment.
1-Sponsors are allowed to sell apartments WITHOUT board approval. The Board has no idea who the new neighbors are or, no personal recomendations, no idea of thier history. Or if they can pay the maintenance.
2-Sponsors are not required to pay the CoOp a flip tax. Which, if you sell your apartment, you have to pay.
All of which, defeats one of the objectives of a CoOp. For example, one sponsor sold a group of studios to a few SouthAmericans who for years, allowed thier friends to use the building as a hotel. After numerous (some serious) problems, we were able to stop this. And, the Sharholders are also losing money on the Flip tax.
Safty Issues: Sponsors generally dont care who they sell to, just so they get top price. We have had prostitutes and bookies living in our building.
I don't what is the ratio of apartment retained by sponsor and those individually subscribed, if you have a co-op counsel hired by the co-op. The issues here are many:
1."Sponsors are allowed to sell apartments WITHOUT board approval. The Board has no idea who the new neighbors are or, no personal recomendations, no idea of thier history. Or if they can pay the maintenance."
A: This is true and approved by the General Attorney's Office. For your info, this is how the co-op became a co-op.
The reason for this is to be able to complete the conversion of the building. Although a mixed blessing at times, you are better off to have the co-op convert and have the board "bring into the fold" the new shareholders, than have the sponsor keep renting units.
If you have a good relation with the sponsor, you may ask to have the new purchasers meet the board to go over any questions they may have. JUST and INFO EXCHANGE, not an ADMISSIONS NIGHT! Some SPONSORS have agreed to this.
2-"Sponsors are not required to pay the CoOp a flip tax. Which, if you sell your apartment, you have to pay."
AGAIN, I don't care for "flip taxes" and they may not make too much sense in a high percent sponsor represented building. After all, the flip tax will subsidize the sponsor by the % it controls. INSTEAD, an assessments makes the SPONSOR responsible for the improvements of the building and building reserves.
"All of which, defeats one of the objectives of a CoOp. For example, one sponsor sold a group of studios to a few SouthAmericans who for years, allowed thier friends to use the building as a hotel. After numerous (some serious) problems, we were able to stop this. And, the Sharholders are also losing money on the Flip tax. "
-- If it was stopped years later, why wasn't it stopped years before??? Sometimes it takes boards to consult the problem with co-op counsel and clarify issues. Don't know if this was your case. Finally, if the investors were South Americans or Jews or Australians or Chinese or UFA (for Unidentified Foreign Aliens) the bottom line is that boards as well as residents have to be atuned to what is going on in the building...some may think that this should be left TO HOMELAND SECURITY!!!
Safty Issues: Sponsors generally dont care who they sell to, just so they get top price. We have had prostitutes and bookies living in our building.
--From "have had" means that you do not have them anymore. So, the conversion worked and these individuals, considered society "scums" are no longer present. Well if the sponsor rents to the same individuals, you have the same situation. The main thing is to be ALERT and discuss the problem with SPONSOR if you have a good relationship or with you co-op counsel as to any irregularities that might be going on in a building.
Finally, ADMISSIONS COMMITTEE, may have similar problems. The bad guys also know how to look like GOOD guys too. So, no matter how much due diligence you do, there is something that may INFILTRATE TOO! Also, while we do not call "PROSTITUTION" certain life-styles, you may end up scratching your head as to who will be the "transient" roommate of some perfectly dignified individuals (I'm sorry if I strike some a sensitive cords with this statement!).
AdC
Alice: As I understand it the "sponsor" is whoever converts a bldg to a coop - usually the owner-landlord of the bldg as a rental property. Shares for apts the sponsor doesn't sell and holds onto are "unsold shares" and the sponsor is thereby a "holder of unsold shares" (an HUS).
Also, I think a sponsor who's an HUS has to file certain documents with the city/state - every year - to retain that status. If he sells unsold shares to someone who buys them only as an investment (to rent the apt) and doesn't live in the apt, I believe he is also an HUS and must comply with the same annual legal requirements as the sponsor. BTW, the law stated that if an HUS occupied an apt for even 24 hours that was enough to qualify as having "lived" there. The laws on all this may have changed - ask your attorney.
We went to court 10 years ago with a man who bought shares from the sponsor and said he was an HUS because he never lived in the apt and was exempt from the same coop rules and fees as the sponsor. Long story but he was essentially claiming "sponsor status". How can anyone beyond whoever sponsors a coop conversion be considerd a "sponsor"? A sponsor of what? And how can there be 5 sponsors for an apt? As I understand, if a person who buys an apt lives in it or his children do, that person is a coop shareholder.
If I'm interpreting this incorrectly, I'd appreciate some clarification. Thanks.
You (and others) make sense. I will let you know the outcome....
Sponsor questions and occupancy are to be brought to the co-op counsel for handling since occupancy is one of the most litigious issues for co-ops. If the family of the sponsor is living an apartment, it might as well become now an individual shareholder's apartment.
Since now you have a "good board" according to "the power of the e-mail" postings, they should know how and where to spend the money to assert the rights of the co-op.
Good luck!
AdC
The children of Holders of Unsold Shares (forget sponsors...these are holders of unsold shares)living in the apartment...effectively...nullify the status of the holders of unsold shares.
These shareholders are now regular shareholders and should be made to follow all rules, regulations (board approvale for sales/sublets etc..), and payment obligations (i.e. flip tax, sublet fees etc.) that any other shareholder must.
These shareholders ahoudl be informed by the board, through your management company that the board no longer recognizes them as holders of unsold shares.
I do not know where I can refer you to, to confirm this...but speak to your attorney...cause I am certain I am correct here.
Good Luck.
Revoke their holders of unsold share status. They are no longer entitled to it...and one less HUS is better for yoru building in the long run.
Dave!
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It's been my understanding that a Sponsor is the "holder of UNSOLD shares" -- when the Sponsor SELLS those shares to someone as a resident, those shares are no longer "sponsor" shares or "unsold" shares.
Bottom line.... consult your co-op attorney, ASAP.
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