For sure, banks are more likely to give mortgages for high-percentage owner-occupied buildings.
Other than that, extreme sponsor presence can be disruptive on boards.
It's always best for co-ops if sponsors sell rather than rent.

There are many negatives if the sponsor is not willing to work with the Board for a common good. I am listing a few problems:

1. Read the prospectus or plan of conversion for rights the sponsor keeps while trying to sell units. Unfortunately, if your sponsor is not in the process of selling units nor it has any intentions of doing so, the conveniences are a sore thumb for many individual shareholders, i.e., no sublet fee paid by sponsor, no interview process for prospective buyers or renters, right to alter a unit without consent except for providing insurance for the contractors.

2. The Board does not have control over the tenants the sponsor rents to. They could be wonderful or they may not be the kind of people that you wish to have for neighbors. Consequently, you do not have input as to discontinuing a lease at the end of the term unless the sponsor has a good relationship with the Board.

2. Sponsor's renters must abide by the rules, but it all depends on your working relationship with the sponsor when it comes to violation of rules and trying to make an individual observe the rules.

3. Some sponsors do not care to renovate or keep up with the general physical maintenance of its units. Consequently, some of the sponsor's units may have serious problems such as tiles in bathrooms that are in bad conditions and leak, old stoves that may leak gas, etc.

4. Emergencies in sponsors'units may become nightmares for a co-op as the sponsor may not be reached off hours. Consequently, the co-op ends up absorbing the work that many times is not for the co-op to assume.

5. In some cases the sponsor may be consulted first in order to have an assessment or to increase the maintenance based on the annual budget. This is because your sponsor may be holding a major stake in the co-op and the maintenance may affect the spsonsor's budget and the financial position of the co-op.

I'm sure there are more reasons, but let others add to the posting.

Excellent points, AdC. Let me add another vis-a-vis renovation:

While the Sponsor may be REQUIRED to provide insurance for the contractor, the Board has no right of review of the alterations planned. Walls may be removed without the Board's knowledge; electrical and plumbing work may be performed that could alter the physical structure; and whether the proper permits/licenses are enforce is anyone's guess.

In a building where Shareholders are scrutinized for compliance, this can be a real headache.

If you are in doubt you may always call the building department and search the property for permits filed. If the walls are being taken down, and not permits were filed, you may always be the small devil by calling the builidng department and cause a bit of a problem. However, in doing so, you may have to pick up sosme of the consequences.

AdC