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Does a Sponsor Have a Duty to Sell Co-Op Shares?Does a Sponsor Have a Duty to Sell Co-Op Shares?

The Court of Appeals’ recent decision in 511 West 232nd Owners Corp. v. Jennifer Realty Co.[1] has been heralded by some as “open[ing] the door” to lawsuits by co-ops and their shareholders against sponsors who fail to sell all or most of the residential units in the co-op in a timely fashion.[2] In that case, the Court decided that a claim by a co-op and some of its shareholders against the co-op’s sponsor, alleging that the sponsor had breached “a contractual duty to dispose of all its shares within a reasonable time,”[3] stated a valid cause of action, and remanded the case, which had been dismissed by the trial court under CPLR 3211(a)(1), for a determination on the merits. The decision has sparked some debate about whether, and under what circumstances, a co-op might ever be able to succeed on such a claim.

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