Coop Shareholder Cannot Sublease After Board Resolution Peter Moulinos

A cooperative shareholder, who owned shares in two cooperative apartments at the 111 Tenants Corp., had subleased both apartments since they were acquired in 1972.  In 2003, the cooperative board passed a resolution restricting the subleasing of apartments and, in passing this resolution, targeted the shareholder.  The shareholder claimed that the board resolution should not apply to her because, at the time she acquired the units, she was told by the Sponsor that she would have “full, unconditional and perpetual sublet rights”.

The cooperative shareholder challenged the board resolution and sought to have it set aside as being unenforceable against her.  However, the Court ruled that pursuant to the shareholder’s proprietary leases, the right to sublet that she acquired when she purchased the shares to her apartments always required board consent, and there was no protection against consent being unreasonably withheld.

Moreover, the Court ruled that even if the shareholder had been granted preferential unfettered sublet rights, Business Corporations Law §501(c), which provides that “each share [issued by a corporation] shall be equal to every other share of the same class,” precludes any special subletting rights.

The action is entitled Bregman v. 111 Tenants Corp., and was decided in the Appellate Division, First Department, of New York.

Any questions regarding this decision, or issues regarding any similar matter, can be directed to Peter Moulinos at peter@moulinos.com.

About Peter Moulinos
The founder and partner of Moulinos & Associates LLC. His experience as an attorney includes practice on matters involving commercial law, real estate law, litigation, international law, employment law, estate practice and trademark matters.

Comments

  1. If three people each have their names on the share certificate, do they all have to live at the coop or only one of the named certificate holders ?

    • It depends what the by-laws and the proprietary lease of the cooperative require. Some require that all shareholders reside in the apartment while others do not impose such a requirement. Feel free to contact Peter Moulinos if you would like to discuss this matter further at 212-832-5981.

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