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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Legal
Satisfied Customers: 116144
Experience:  JA Mentor -Attorney Labor/employment, corporate, sports law, admiralty/maritime and civil rights law
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can a co-op board discriminate for different classes of sh

Resolved Question:

can a co-op board discriminate for different classes of shareholders?
Submitted: 7 years ago.
Category: Legal
Expert:  Law Educator, Esq. replied 7 years ago.
Shareholders can be given different rights and privileges in accordance with the bylaws set up by the organization. This is not considered discrimination. When a company of any type issues shares, they can issue different classes such as preferred, voting, non-voting or any combination of those.

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Customer: replied 7 years ago.
The bylaws stated no restricion on renting your unit. Later on, a 3-year rental restriction was voted on and passed concerning only those who were not original shareholders. Original shareholders are still able to rent without restricion. Is creating two classes of shareholders with different rights considered discrimination?
Expert:  Law Educator, Esq. replied 7 years ago.
No it is not considered discrimination. Additionally, in order for the condos to be able to be sold and financed, the creditors now require certain percentages of condos be owner occupied, which is why many condo boards have placed such restrictions. It is only discrimination when it is done based upon the age/race/sex/disability of the owner.
Customer: replied 7 years ago.
This is NOT a condo,it is a co-op as I stated.The original prospectus called for no rent restrictions .The change is ONLY for a certain class of shareholder,the resale buyer and after their purchase.Can I,a shareholder, be allowed to rent while my neighbor,a shareholder, cannot? I can understand restrictions voted for all shareholders but can they do it for just some and can you give me an example?If so, I will accept.
Expert:  Law Educator, Esq. replied 7 years ago.
Condo, co-op,HOA they all operate the same way and under the same rules. I understand what you are saying because I have set the same thing up to be done in several associations. There IS NO DISCRIMINATION in doing this. The older shareholders can rent, but once they sell their units then those units cannot be rented any longer. The new buyers come into the co-op KNOWING this up front. This is actually one of the only ways a co-op can start to phase out rentals because they cannot pass a bylaw that would be retroactive on something like this because then the original owners would be claiming grandfather rights because this bylaw wasn't in place when they purchased. The new purchasers have it right up front.
Customer: replied 7 years ago.
Ok sorry to keep replying but I and most of the resale buyers came in under the original prospectus.I agree that rules can change for new buyers going forward but I bought with no renting restrictions and that changed not just for those buying after that but to those who bought before UNLESS you were an original shareholder.This created 2 classes of shareholders with different rights even though they bought with the same rules and by-laws.Isnt that discrimination?
Expert:  Law Educator, Esq. replied 7 years ago.
No, it is not discrimination, but if they are changing the rules for those who purchased under the old rules but had already rented their premises, then those owners would have the argument that they should be grandfathered in under the rules they came in under. If those who came in under the old rules had not yet rented and were not original owners, then the rules can change for them. I am sorry you do not like it, but that is the way it works with co-ops, HOA's, Condo Associations and that is the major problem with them.
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