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Sat Feb 13, 2010 12:28


I have read what I could find in past messages about boards creating new policy and grandfathering. I am ambivalent about grandfathering and I wonder if there is any widely accepted best practice or law that could offer guidance as we (my fellow board officers and I) consider the pros and cons.

Buying into a co-op is a tremendous investment. It is the largest investment many of us will ever make. It is a huge life decision. I can understand why grandfathering would make sense and would be the fairest course of action in certain cases.

Say a TV producer buys into a co-op. He pays careful attention to what the sublet policy is, because his work requires him to be in New York for long periods of time, and then in California for long periods of time. He loves the building and wants it to be his permanent base, but also anticipates possibly needing to sublet for several years at a stretch. The prop lease stipulates that shareholders must occupy their apartments for two years, after which time they may sublet. There is no time limit placed on subletting. Our hypothetical TV producer happily lives in his apartment for several years, after which time he is offered work on a show in California. He accepts the offer and starts making plans to sublet. Around this time, the board decides to impose a sublet limit of three years, after which time shareholders must either move back into their apartments or sell. Because the TV producer has no guarantee that his work obligations in California will end in under three years (the program may last four years, five years), he feels forced into a position where he has to sell his apartment.

In this case, because the investment is so enormous, the fairest thing to do, it seems to me, is to grandfather. Otherwise, it is almost as if one party has broken a contract. Agree? Disagree? If you disagree, can you tell me why?

Or, say a man who loves cats and has always owned them and plans always to own them buys into a co-op. He carefully scrutinizes the prop lease, making sure that the buildings he looks at allow pets before making such a large investment/life decision. He buys into a pet-friendly building. After he purchases, the board decides to implement a no-pets policy. In this case, too, not to grandfather seems unfair and similar to breach of contract. I have heard of cases where a SH may be allowed to keep the current pet, but after that pet dies must abide by the new no-pet policy. This, too, seems unfair to me.

Basically, I have problems with policies that change the conditions of original purchase and that essentially force people into a position where they have to sell. I really believe that people prefer to have as much autonomy and flexibility as possible vis-à-vis a very considerable investment.

This is not to say that I prefer a lax environment with no limits. But I do think that boards sometimes cross the line between looking after the shareholders’s collective investment and infringing on personal autonomy, personal decision-making. Boards need to manage, indeed, but micromanaging can really backfire imho.

On the other hand, I am aware of what seems to be the golden rule of business law: treat all shareholders the same. I just don’t know if that is possible or ethical in the case of policy changes. Otherwise things could change whimsically from year to year and people would never really know where they stand, and might find it quite difficult to make major life decisions.

    • Re: Grandfathering CDT, Tue Feb 16 16:59
      Grandfathering usually applies only to stuff that's already in place at the time the new policy is passed. If you decide to prohibit wet-over-dry renovations, pre-existing installations are... more
      • Re: Grandfathering G K, Wed Feb 17 10:33
        It's a fundamental principle of co-ops that House Rules are subject to change at any time, and the Proprietary Lease may be amended by a supermajority vote of the shareholders. Everyone who buys into ... more
    • grandfathering Joseph D, Sun Feb 14 22:25
      I fully agree with this person on this bad clause being abuse by certain dictator who sat on coop for years claiming granfather clause as if they are entitled to privilege exclusively for them. for... more
    • RE: grandfathering DavidG, Sat Feb 13 23:07
      Your right a housing investment is major decision of time, money and effort. When one chooses to purchase shares in the cooperative, they agree and accept the proprietary lease, house laws, and... more
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