Although I am not lawyer (and I suggest that the Board discussed this with theirs), I have always been told that treating everyone the same is the best policy. I would suggest not grandfathering. I would also suggest that the President recuse himself/herself from the decision.

Treating all shareholders equally is not only the best policy ethically, it's the required policy legally. That is, under New York State corporate law you must treat all shareholders the same.

Of course, you can always make exceptions on a case-by-case basis.

But if I were on your board, I would suggest that the long-time sub-lettors be required to follow the same rule as everyone else. Once the rule is enacted, why not give them the same amount of time as everyone else? So even after having sublet for, say, a decade, the new people will have three more years (or whatever you decide is the max) once the policy goes into place.

Not only does it treat everyone fairly, it keeps you out of legal jeopardy, too.

Rigidity rather than flexibility is, in fact, not good governing. As a lawyer explained here:

http://www.habitatmag.com/publication_content/2008_october/featured_articles_from_our_print_magazine/authoritarian_boards_public_rancor/authoritarian_boards_public_rancor_p_2

"A board can decide to not enforce a rule," notes attorney Joseph G. Colbert, a partner at Kagan Lubic Lepper Lewis Gold & Colbert, and an adjunct professor at St. John's University School of Law. "If it's just something the board passed and not a bylaw amendment, then the board, like any political body, can interpret when these rules can be enforced, subject of the approval or disapproval of the residents."

Grandfathering was the wise solution in this case, in which a board until then had wasted enormous time, energy and money and found itself harshly spotlight on TV news.

It probably wouldn't hurt to read one of the articles at http://www.habitatmag.com/publication_info/site_map#subletting

DavidG - "board member" is right. Per state Business Corporation Law (the "BCL"), all SHs must be treated "fairly and equally." Other than occasional exceptions for good reason, what applies to one applies to all.

Your coop attorney should first check your by-laws to see what they say on subletting. I have a few questions for you.

1) You said 2 SHs asked to sublet with the same rights/duration/terms as the original three. What makes the three who sublet for 10+ years "original" and why do their rights etc. differ from other SHs who sublet?

2) Unless a new sublet policy/grandfathering was suggested to all SHs (e.g., in a memo or at the annual meeting), why are SHs asking for special terms or involved in this? What a board discusses among themselves including new rules it may enact shouldn't be open to opinion or question by everyone.

3) You said your board pres is related to a grandfathered renter. Doesn't that mean you already have "grandfathering" in place - and if so, how did that come about???

4) 3 units in your 57-unit bldg have been sublet for over 10 years. How many total sublets do you have in your bldg?

In my opinion, your board should carefully review its sublet policy, make sure you have a comprehensive sublet application package, and as required by law treat all SHs fairly and equally in enforcing your sublet policy.

If you want to enact a new policy allowing subletting for 3 of every 5 years and add a fee, fine, but make sure your by-laws permit this. If they do and you don't have a fee, you should. I don't know of any coops that don't charge a sublet fee and they are all substantial, not just a token fee like $50 or $100. Our coop (and others I know) have a fee for all new AND renewal sublets equal to 2 months maintenance. Especially in smaller bldgs with few ways of generating funds, a sublet fee can be a good source of revenue.

In my reply to DavidG with my 4 questions on subletting, I neglected to enter my name. I'm BP, not Anonymous. I forgot to fill in the blanks at the top of my posting. Sorry!

I don't mean to be impolite or snarky, but since your post appears -- and I may be misreading -- to give legal advice that directly contradicts a widely credentialed attorney, I'm not sure that's a proper thing to do. Laypersons don't generally have an accurate reading of the nuances and subtleties of law, and probably should not be dispensing legal opinion.

JB - Your post stated the following:
"A board can decide to not enforce a rule," notes attorney Joseph G. Colbert, a partner at Kagan Lubic Lepper Lewis Gold & Colbert, and an adjunct professor at St. John's University School of Law. "If it's just something the board passed and not a bylaw amendment, then the board, like any political body, can interpret when these rules can be enforced, subject of the approval or disapproval of the residents."

I'm not sure what you mean by saying I directly contradicted the above attorney and I, a lay person, shouldn't dispense legal opinion. I suggested to DavidG that his coop see what its by-laws say on subletting before enacting any new policy. I also said business corporation law requires that all SHs be treated the same which is widely known. I didn't contradict the above attorney who said a board can decide when a rule it passed should/shouldn't be enforced. My comments weren't even on that point. Sorry, JB, but I think you did misinterpret my posting.

If I misinterpreted, I apologize. Here's what I read on your posting:

>>it's the required policy legally. That is, under New York State corporate law you must treat all shareholders the same.>Of course, you can always make exceptions on a case-by-case basis.<<

When a layman uses the term "legally" and references "New York State corporate law," my instinct is to ask for a cite. One of the most dangerous things I find in any discussion is the notion that one's lay interpretation of the law is a claim "which is widely known." In my long experience, things we believe are widely known often are not true.

There also seems to be a contradiction, where you say all shareholders must be treated equally, except when you make exceptions. Exceptions, ipso facto, are unequal treatment. {This is different from treating shareholder fairly, which I'm sure we can all agree is the proper thing to do.) So I'm not sure what you're saying.

JB - My posting name is "BP". On my last post, I forgot to put it at the top and my post was sent as "Anonymous." I sent another post noting that. That aside, you're referring to lines about >>must treat all shareholders the same>of course you can always make exceptions on a case by case basis>Thus, board members are fiduciaries to the shareholders and unit owners who have elected them to their position of power. Accordingly, individual co-op and condo board members are strictly prohibited from self dealing to the detriment of their association and its constituent shareholders or unit owners. They are also required by law to treat their shareholders or unit owners with meticulous fairness and equality.<<

See: http/www.cooperator.com/Is-Your-Board-Carrying-Out-Its-Fiduciary-Duty/Page 1.html

I'm sure many other posters here can agree that treating all shareholders the same is a widely known fact and is true.

As for making exceptions, what I said wasn't to imply unfair or unequal treatment - only making an occasional exception to a coop rule. For example, if a coop allows apt work from 8am to 4pm, but a resident asks if his men can work until 5pm which will enable them to finish the work and not have to return another day. That's simply an accommodation if a board deems it acceptable. I doubt there are any coops that won't make exceptions to rules occasionally if they don't disturb the bldg or other residents or aren't unreasonable.

I would like to thank everyone for their response and feedback. As a new member to this board, we will be updating our polices and look for common practice to help at least drive a direction that is consistent, and fair to our shareholders, that allows flexibility but is firm and sets a goal of a financially and structurally sound building.
After reading the comments, previous discussions and articles, as well as previous experience, we will work with our attorney to craft a policy that will be consistent with our bylaws, prop lease, and NY law.
One goal is to ensure each shareholder has a binder with the policies for their reference - to reduce noise around operating procedure, increase transparency, and allow our co-op to become something special. I know we can&#146;t please everyone, but we will remain focused to do the best we can for our shareholders.

Thanks again for your comments.