Q. I live in a 192 unit co-op in Brooklyn where the sponsor still owns about 20 units. The sponsor does not come to the annual meetings, but sends in proxies. The current board president, who was also on the ballot, uses the sponsor’s shares to vote for herself and her friends, making it impossible for others to get on the board. Is this a common practice, and is it legal?

                          —Concerned Shareholder 

A “The short answer,” says Mark Hakim, Schwartz Sladkus Reich Greenberg Atlas LLP, ” is that a sponsor in a cooperative corporation may generally provide another person–including a current board member or officer—a proxy entitling that person to vote the shares as they see fit, including for themselves.” 

“When a cooperative building is formed in New York, it is created by a developer, known as the sponsor. For the offering plan to be declared effective, the sponsor must sell a minimum number of units. Beyond that, generally, it is up to the sponsor whether to sell the remaining “unsold units.” These unsold apartments retain their status as “unsold shares” and often come with more favorable leasing, sale, and alteration rights. 

“Regardless of these provisions, the underlying principle is straightforward: the sponsor owns shares in the cooperative and, like any other shareholder, including the letter writer, is generally entitled to vote those shares for whomever they choose to serve on the board. And pursuant to New York Business Corporation Law (BCL) § 609, they may authorize another person to act for them by proxy, which a written authorization allowing another person to vote on their behalf. Unless the cooperative’s bylaws explicitly restrict this, a sponsor may freely give a proxy to any third party, including a current board member or officer. This is no different from any other shareholder provided a proxy to someone they trust or are aligned with. Subject to any restrictions in the cooperative’s bylaws, both the sponsor and the letter writer have the same fundamental rights regarding the votes attached to the shares they own.

 “I would encourage the letter writer, and any other concerned shareholders, to consider reaching out to the sponsor. An open conversation about goals and priorities for the cooperative can be productive and may help create opportunities for support from the sponsor in future board elections.”