An Upper East Side co-op board has sued sponsor Frost Equities, alleging the development firm failed to sell the vast majority of its units 25 years after converting the building from a rental. Frost Equities, led by general partner Robert Singer, controls nearly 33 percent of the shares of 1160 Third Avenue, according to the suit, filed Nov. 6 in New York State Supreme Court.
With such a large stake in the sponsor’s hands, board members claim that the building is full of transient tenants, that they cannot alter those unsold units without the sponsor’s consent, and that they face difficulties refinancing or obtaining conventional loans from certain lenders.
The developer owned 60 of the 163 rental apartments at the building during the original 1986 conversion, but has sold only nine of those units since then, the suit says.
Since the developer owns such a large percentage of the building, it is not a true co-op, making it impossible for individual unit owners to sell their apartments at market rates, the board members claim.
The sponsor held its first closing at the building in January 1988 and had a $3 million mortgage to pay off, and the maintenance charges are based, in part, on the size of that mortgage.
The suit asks the court to order the developer to stop renting vacant apartments, continue to amend the offering plan until all vacant apartments are sold, and award an unspecified amount of damages against the developer.
Control over the building has been an issue for years at the property. In 1994, Frost Equities filed suit seeking to invalidate a board election after election inspectors refused to count any of its votes, according to a 2004 story in the New York Law Journal. Sponsors are required to give up control over co-op boards within five years of the first closing, or when 50 percent of the units are sold, whichever occurs first. However, Frost Equities attempted to maintain control over how it believed the building should be operated.
Frost Equities officials were not immediately available for comment.
The company continues to designate one of the seven members of the building’s co-op board, according to the complaint. The developer is still allowed to vote all of its shares in the election of the remaining six slots of the co-op board.