Every owner of a cooperative apartment signs a proprietary lease when he or she buys shares. It establishes rights and obligations as a lessee under that lease. But the key point is that these leases are not carved in stone. They’re living, breathing documents, and frankly, they should be reviewed every once in a while by the board, and they should be changed as appropriate. Times change, situations change. Amendments to the lease are totally proper.
Amending the lease is, in theory, very simple. All you have to do is get two-thirds of the lessees to agree to the change. It gets a little complicated because most leases state that the amendment is done by a vote at a meeting called for that purpose, or by consent. This past year a judge decided that whenever changes are made without a meeting, you need the consent of everyone. Otherwise, it’s no good.
So, the two-thirds rule goes out the window. You don’t need two-thirds consent. You need 100 percent consent. So to get around that, whenever there’s an amendment, we call a meeting and give a proxy for that meeting that says, “You don’t even have to come to the meeting. Please vote yes or no.” So in effect, it’s the same as a consent.
To make it legal under that new decision, what we do is we actually have a date and a time for a meeting, we have somebody there to call the meeting to order, and then we
just count the proxies. And that’s how we get around the new rule.
Why amend the lease? Perhaps the biggest problem in leases is the so-called “use clause.” Who can use the apartment? Many people let others use their apartments while they’re away. Some people rent their apartments. The Airbnb situation has made this a major problem, and therefore we’re looking carefully at the exact language in the use clause.
For example, the use provision typically says that a guest can use the apartment, but doesn’t define guest. Nor does the use provision necessarily say that the shareholder has to be there at the same time as the guest. We have situations where somebody goes away for an extended period of time and puts his or her mother-in-law in there. Is that a guest? She’s not paying any money. In effect, you have a stranger living in an apartment for an extended amount of time. Most co-ops don’t want to see that.
On the other extreme, you’ll have somebody who comes in and pays some money. That’s not really a guest. We consider that a sublease, but the problem is that unless you have specific language, it’s debatable what is really meant. Therefore, what we’re doing for many of our clients is building a stronger use provision. We’re saying exactly who a guest is. We’re saying exactly what a sublease is. This is a major issue. We’ve had dozens of requests from clients to go over this in the past 12 months.
So there are good reasons why the proprietary lease should be reviewed often and changed once in a while.