Charging Legal Sublet Fees Does Your Board Have the Authority?

In a recent decision, New York's second highest court ruled that the Hotel Des Artistes coop-erative did not have the authority

to impose a 30 percent sublet fee on its shareholders. In Zimiles v. Hotel des Artistes, Inc., the judge required the co-op to return $300,000 in sublet fees collected since 1990. Although the case remains in litigation, it should serve as a warning to all boards that unless they have the proper authorization written into their governing documents, they may be open to challenges on sublet fees, especially if those fees go beyond the usual reasonable amount charged of five to ten percent of the rent.

Sources of Authorization

The board gets its authority to regulate subleasing from the proprietary lease and by-laws. The scope of the board's authority depends on the exact language of the building's documents. It is not enough that either the proprietary lease or the by-laws contain the proper language; both documents must include the right authorizations for the co-op to comply with the court's ruling.

The proprietary lease (usually Paragraph 15) commonly provides that co-op consent to a sublease is subject to such conditions as the board may impose. Twelve years ago, in Zuckerman v. 33072 Owners Corp., the Appellate Division ruled that this broad language in a proprietary lease grants to the board wide-ranging authority to impose a reasonable sublet fee as a condition to consenting to a sublease. What is reasonable, though, depends on what the by-laws say.

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3 Comments

  • It was recently determined that four of the 13ll owners subletting their apts have been charged a fee. The others have gone for months and up tp 10 without paying. Who is responsible for the fair and equitable collection of these fees per the By-laws/proprietary lease? What is the reponsibility of the Managing ageny and the accountant?
  • My component managment company forgot to bill me the sublet fees for many years . Can they charge me for past sublet fees now ?
  • The coop through the managing agent has been charging me sublet fee of 31% of the maintenance fee without a board resolution for around 8 years now with 2 other shareholders while not charging many others with rented apartments, never giving a copy of the board resolution asked from them repeatedly. What course of action can I take? Can I get my money back?