Attorney Stuart Saft, a partner at Holland & Knight, addressed the topic of “Increasing Co-op Values in a Condo-centric World” at the May Managers’ Meeting. With condos in New York City selling for approximately 20% more than co-ops, Saft proposed several actions a co-op board could take to increase the value of its apartments.
According to Saft, an initial step would be to reconstruct the rules of the co-op to make them more in line with those of a condo. “There is nothing in the law that requires a co-op to have a proprietary lease,” Saft explained. “The lease exists purely because it’s been done that way for 80 years.”
He recommended replacing the cooperative’s proprietary lease, which establishes a landlord/tenant relationship, with a shareholders’ agreement that is consistent with the corporate structure. In most instances, it would require a supermajority vote by the shareholders to effectuate the change.
Saft believes that a structure more similar to a condo would result in the differences in values of apartments diminishing over time. Another great benefit would be to remove jurisdiction for the disputes that arise between the co-op and the shareholders from the New York City Housing Court.