In the Matter of 320 West 87 LLC v. 320 West 87th Street, Inc.
Attorneys and Parties
Brief Summary
Cooperative housing: whether a purchaser of a sponsor’s remaining apartments is a holder of unsold shares (HUS) entitled to sponsor-level exemptions from flip taxes, sublet fees/approvals, and renovation approvals.
Declared petitioner an HUS with broad exemptions, but required board approval for renovations involving building systems, denied a permanent injunction and damages, and denied the Cooperative’s cross-motion seeking a declaration that petitioner is not an HUS.
The Appellate Division struck the building-systems exception, granted a permanent injunction preventing the Cooperative from interfering with HUS rights, and clarified that denial of damages was without prejudice; otherwise it affirmed.
Although the governing documents did not unambiguously allow transfer of HUS status, the Cooperative waived or modified any prohibition by long-term conduct treating petitioner as a sponsor/HUS—meeting minutes, notices, offering board seats, and permitting sublets and renovations without approval or fees—and it waived the lease’s no‑waiver clause by its course of conduct. Petitioner never occupied the units, preserving HUS status.
Background
Petitioner purchased the sponsor’s remaining unsold shares and appurtenant apartments in a cooperative owned by 320 West 87th Street, Inc. The parties disputed whether petitioner qualified as a holder of unsold shares (HUS) with sponsor rights, including exemptions from flip tax, sublet approvals/fees, and renovation approvals. Petitioner sought declaratory and injunctive relief and money damages; the Cooperative cross‑moved for a declaration that petitioner was not an HUS and was subject to ordinary tenant‑shareholder rules.
Lower Court Decision
Supreme Court, New York County declared petitioner an HUS exempt from flip tax, sublet approvals and fees, and most renovation approvals but carved out an exception for renovations affecting building systems; it effectively denied a permanent injunction and denied damages, and it denied the Cooperative’s cross‑motion.
Appellate Division Reversal
The Appellate Division modified by striking the building-systems exception so petitioner does not need board approval for renovations, granting a permanent injunction enjoining the Cooperative from interfering with petitioner’s HUS rights, and clarifying that denial of damages is without prejudice to seeking them in a related action; it otherwise affirmed the declaration that petitioner is an HUS and the denial of the Cooperative’s cross-motion.
Legal Significance
Confirms that holder of unsold shares (HUS) status is governed by the cooperative’s governing documents but that parties may waive or modify those provisions by conduct; even a no‑waiver clause can itself be waived through consistent treatment of a party as an HUS. Cooperative boards that recognize a purchaser as a sponsor/HUS through minutes, notices, and practice risk being bound to those rights. The decision also underscores that HUS exemptions extend to renovations without board approval where the governing documents so provide, and that permanent injunctive relief is appropriate to protect those rights.
A cooperative’s sustained course of conduct can confer and protect holder of unsold shares (HUS) rights—including freedom from flip taxes, sublet approvals/fees, and renovation approvals—despite silence or limits in the documents and despite a no‑waiver clause; courts will enjoin boards from later reversing course.