Sponsor Rights

I’m curious about the rights of sponsors in coops. Do sponsors vote on coop matters? Do sponsors have to sell their units at any point, or can they hang onto their units infinitely? Any information would be great.
Thank you

Guest User | 6 years and 8 months ago

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resident2 | 6 years and 8 months ago

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They are supposed to be rent stabilized. Just because the sponsor has put in a new a kitchen, replaced the bathroom etc it is still Rent Stabilized even if the sponsor or any investor that bought the sponsor rights is the Landlord of that rental unit it is still rent stabilized. The rent will be based on the last tenants rent + a vacancy allowance + 1/40 of the cost of legitimate capital improvements. The new vacancy tenant should get a rent stabilized lease with a rider; out lining all the capital improvements claimed & cost. The rider also explains that they have the right to challenge the new rent.
If the sponsor sold it to a third party (arms length transaction), a person, (not an LLC or corporate entity), and that person renovated etc, it may not be rent stabilized, but it would have to be approved like any other sub-let through the co-op board. If the co-op board is lax on this. DO NOT BUY INTO THE BUILDING. It shows that the board is not looking after home owner share holders.
The Co-Op board as owner of the building can check with DHCR ( Department of Community R enewal) the State agency that regulates Rent Stabilization, in Brooklyn the office is on Hanson St. To see what apartments are still registered, if de-stabilized it will show when & for what reason. All rent stabilized vacancy leases are registered or should be, along with the capital Improvement calculations, they should also be registered every year. If not they cannot legally collect rent.

Guest User | 6 years and 8 months ago

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Thank you so much for this reply. I believe that when the rent control/stabilized tenants moved the sponsor simply renovated and raised the rent to market value. I don’t know the legality of it in this specific case, and prior to bringing up this issue, I’d want to be certain, obviously. Without paying a lawyer for feedback, does anybody know of a way to check on if these sponsor units are still in fact supposed to be rent control/ rent stabilized.

resident2 | 6 years and 8 months ago

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When rental tenants move out of sponsor owned units, most likely rent stabilized or rent controlled tenants, the sponsor will sell them. Because if the sponsor does want to keep renting the unit, it is still under rent stabilization. Most sponsors fix them up & sell them, at which time they can sell them to whoever without board approval. Most sponsors do the right thing and sell them to owner occupants. It is in their best interest to do so when they still own units so that the property values hold up for their next sale.
If the sponsor does still own the majority of the units, the sales are at a discount, fewer banks will finance the sales etc. But once the tipping point is reached with more owner occupants the prices will start increasing to market rate.
The owners have the right to appointment the managing agent even if the sponsor does own the majority of the shares after a few years; I think it after 5-6 years. The sponsor cannot vote on the management if the owners vote against his/her choice.
Co-Op owners need to take an active part in the management of their bu ilding. Many sponsors are very good mangers of their buildings. Many once they have co-oped it do not want to carry on managing it after the initial couple of years. I have seen some that outright abuse the building if they are allowed to keep the reigns. IE; using the co-ops employees to do work in other buildings owned by the sponsor at the co-ops expense. Have deliveries made to the co-op building then moved to other buildings owned by the sponsor.
But most are good.

Guest User | 6 years and 8 months ago

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Thank you both. That’s very helpful.

slopegirl | 6 years and 8 months ago

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I’m not sure but I do think when a sponsor sells the sale is exempt from board approval, or at least it was so in my old coop building

angelique.m.west | 6 years and 8 months ago

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As long as the sponsor still owns units in the property they are able to cast votes just like any shareholder. The thing to watch out for is if the sponsor still owns the majority units. If so, they essentially control the building and will usually vote with their wallet. They will often appoint the managing agent or use a firm they are affiliated with to run the building. And if there are operational issues, they may drag their feet or be very unresponsive to other unit holders. The offering docs for the building may offer some insight on the timetable by which the sponsor will cede control. But in many cases sponsor holds onto their units for as long as they like and rent them out for income.