Hi, JBM,

I'll take the first crack at this.

If the fees for a sublet apply to anyone who sublets, then the fees are not unequally applied. Since they apply equally, no one is being treated differently.

For example, just because the little old lady in 7-B chooses not to sublet while the soldier sent to Iraq for three years in 12-V finds a renter doesn't mean the soldier is being discriminated against. He's being charged for taking advantage that the co-op offers.

Likewise, let's say your building has a party room that's available only for a fee. You want to rent it, but don't want to pay the $50. You can't claim that your being discriminated against on the grounds that your neighbor -- who isn't having a party in the room -- doesn't have to pay it. The point is that your neighbor, or anyone else in the building, would have to pay the same rate for the same service.

I can't tell you where the equal rights for shareholders principle has its source, but it wouldn't have to be printed in your PL any more than your PL has to prohibit any other illegal activity.

I don't think the sublet fee has anything to do with equality but what the PL says about being able to sublet an unit. The PL usually says something about shareholders may be able to sublease the apartment provided that corporation is notified and "reasonable expenses" surrounding the rental are covered by the shareholder. In other words, the co-op does not seek a "sublet fee" but recovery of reasonable expenses. This is why a "fee" amendment is usually introduced in coops where subleasing is allowed.

Finally, shareholders in a co-op most likely have COMMON SHARES with same value as stated in the beginning of the black book or prospectus. Therefore, the deviation of the PL is a breach to the coventant between a shareholder and the co-op and has nothing to do with a violation of the equal rights since all shareholder who sublease their apartments are most likely charged the same fee.

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Thanks for the response. I guess my main question is still - where does the equal rights for shareholders principle find its source. I've heard (as in my original example) that sublet fees that are significantly above the normal expenses of administration apparently constitute unequal treatment and require an amendment to the the PL based on this equality principle.

I don't think the problem is equality but USURY and what is defined as USURY.

Youur rights are defined by the PL. Unless the PL has language to allow sublet fees, a co-op runs the risk to be taken to court and lose the case. Many shareholders accept the sublet fee, even if not truly legal, because they undestand that subletting may be a privilege that they may be taken away. So, it's better to pay the co-op for the provilege of having a sublessee while the real shareholder is enjoying other pastures (whether greener or not so greener).

When structuring a sublet fee, boards have to be conscious that the sublet should not be so high as to constitute usury. A certain percentage is acceptable, after than percent, the fee becomes questionable.

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Sublet issues aside - In general -Does anyone know the source of the principle of equal treatment for all shareholders. (i.e. granting some privilege/right to some shareholders and not others).

It's difficult from these posts to understand what you mean by the "source of the principle of equal treatment."

All Shareholders have the right to vote, sublet, renovate, participate in amenities (eg., fitness rooms, pools, roof decks, parking, etc.) whether fee-based or not. All Shareholders have the right to sell their shares. All Shareholders have the right to run for a position on the Board of Directors.

The Proprietary Lease and ByLaws of each cooperative outline all of the rights of ALL Shareholders. What privileges or rights are you referring to, where some Shareholders are receiving "unequal" treatment?

McKinney, consolidated laws of New York - book 6 Section 680-800, I believe Section 709 has paragraph that you cannot treat shareholders unequally - same thing