Renting out their unit has long been a strategy for condo owners (and some co-op shareholders) who—usually because of an extended absence, or as an extra revenue stream—wish to retain ownership of an apartment that they’re not living in at the moment. The tanked economy has expanded this trend throughout the region as more owners are looking to save or even make money on their apartments.
While this trend may be a boon for rental brokers enjoying a surge in requests for their services, it hasn’t been an unalloyed blessing for co-op and condo buildings themselves. Allowing owners to rent or sublet their units has its pros and cons, as does living in a mixed rental/owner-occupied building. Most rental tenants are model citizens who wouldn’t dream of flouting their building’s rules or making trouble for themselves or their neighbors. But others don’t feel that sense of responsibility, which can be frustrating for board members and owners alike. Allowing owners to sublet their units or use them as investment properties can mean more revenue for the building in the form of sublet fees, but it can also make it harder for a building to open a line of credit, or refinance its underlying mortgage.
Co-op vs. Condo
How well a building’s rental/ subletting policy functions is strongly influenced by how building administrators handle the process, and how clearly and consistently a building’s rules are communicated and enforced among both unit owners and rental tenants.
Most co-op buildings simply forbid renting and leave it at that—and as private corporations, they have that right. Others allow limited subletting under certain circumstances, but usually with strict rules, maximum allowable rental terms, and the imposition of a sublet fee paid to the building. The recession has changed that slightly however, and sublet restrictions vary depending on where the building is located, who lives there and even on what the market is doing.
“During a bad real estate market, many shareholders can’t sell their apartments without suffering a loss in equity,” says Robert Harwood, chief operating officer of Century Management in Manhattan. “And many boards realize that they have to accommodate their constituents by letting them sublet.”