Thursday, July 24, 2008
Share Value? Going Down? Going Up?
I see some questions around about share value. After Conversion will they go up? go down? No one can know the future but I have a prediction....
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Picture of a Storage Room
3 comments:
It is true that by issuing more shares your percent of ownership of the building will go down. This will affect the amount of the whole co-op you own.
The amount of the new shares proposed is extremely small in comparison to the whole.
Your actual drop in percent of ownership is less than .05% depending on the size of your apartment.
Conversely if you buy a storage room your percent of ownership will go up a bit and vary a small bit depending on the size of the storage room. A bit equals around .01%
People will still come look at your apartment and really should only care about how much that translate into the maintenance charge.
Maintenance: In a way you are getting an advantage by lowering your percent of ownership in that it will decrease your overall contribution to maintenance; NOT the actual amount but the percent contributed to make up needed expenses.
Common Storage: But for those that currently have common storage (an unknown percent) you gave up the common space and less use of the building for that change in percent to be owned by others who are now paying for that percentage of space.
Voting Rights: You will see a drop in your voting rights in that you own less of the Co-op. But overall it can be argued it is a very small percent and should not affect any one election in future co-op voting, let alone that voting like this is rare to begin with.
Legal questions:
(a)Ian Quon's memo mentioned that the privatization could cause share owners who are not happy with it sue the co-op. Can this be done fully legally without this problem? I assume that the co-op probably has insurance to protect itself. But it could still be a drag in time and goodwill among neighbours.
(b) On the purchase transaction itself, what kind of expenses(lawyer fee, closing tax, title insurance, etc) will be incurred by the buyers and the co-op. It seems daunting for each buyer to hire a lawyer for this kind of purchase. On the other hand, I don't expect it to be completed by each buyer handling over a check, right?
Leonard 5J,
a) Day 1 of law school you learn anyone can sue anyone. To say that people should not undertake a plan because someone might sue would have meant the end of modern civilization when Columbus got funding from the Spanish Queen instead of the Italians, the Italians could have sued then too....The sale of common space to existing co-op share owners is performed by thousands of buildings all over the State of New York. Co-op suits against boards are i. extremely rare and ii. almost universally unsuccessful. The standard is that we act in the interest of the Co-op. With the current problems in the rooms and so many rooms going to so many shareholders combined with a vote of 50% of shareholders endorsing it, I think any lawsuit is frivolous. But Ian can sue if he likes, he can still sue Columbus if he likes ....if he can serve him with the papers.
b)The legal fees are already budgeted into expenses and we predict the usual application fees to be borne by the Co-op and a lot of the legal work to be done by the building's attorneys. However, your personal financing, if there is any, may have its own fees that the Co-op will not cover, e.g. a refinance or home equity loan fees. Of course if you feel it necessary to have your own attorney to look over the paperwork of the very similar 90+ purchase agreements that would also be a cost you would have to cover.
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