4 years ago

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What are unsold shares in a co-op?

We’ll demystify the following topic in this video. My name is Chris at Hauseit. Hauseit is the largest Assisted FSBO and buyer agent commission rebate company in NYC, established 2014.

Unsold shares of a coop are exactly that, shares that haven't yet been sold by the original sponsor, mean the original building developer or builder. These unsold coop shares are usually apartments in their original condition that are still being rented out by the sponsor.

The sponsor also has unique rights per the offering plan and proprietary lease. For example, they don't have to get board approval to sublet, don't have to follow the sublet policy, don't have to pay the flip tax etc. It's good to be the sponsor!

Here's what a sample proprietary lease for a co-op in NYC says about unsold shares:

(a) Unsold Shares

The term "unsold shares" means and has exclusive reference to the shares of the lessor which were issued to the lessor's grantor(s) or individual(s) produced by lessor's grantor(s) pursuant to the plan of cooperative organization of lessor; and each block of such shares shall continue to retain their character as unsold shares only until (1) they become the property of a purchaser for bona fide occupancy (by himself or a member of his family) of the apartment to which such shares are allocated, (2) the holder of such block of shares (or a member of his family) becomes a bona fide occupant of the apartment to which they are allocated or (3) the transferor, in connection with his assignment thereof, does not designate the transferee as a holder of unsold shares. The term "holder of unsold shares" wherever used herein shall include a "purchaser of unsold shares," such terms being used interchangeably in this lease.

(b) Subletting apartment and sale of shares

Neither the subletting of the apartment nor the assignment of this lease, by the lessee who is the holder of the block of unsold shares allocated thereto, or any lessee who has not purchased for his personal occupancy or that of any member of his immediate family shall require the consents of the directors or shareholders ... nor shall lessor make any charge of any kind in connection therewith.

Without the consent of the lessee, no change in the form, terms or conditions of this proprietary lease ... shall (1) affect the rights of the lessee who is the holder of the unsold shares accompanying this lease to sublet the apartment or to assign this lease ... or (2) eliminate or modify any rights, privileges or obligations of such lessee.

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