Home Sweet Home? Handling Rental Tenants in Co-ops & Condos

While most residential buildings in the city are either purely rental or purely co-op/condo, there are many co-op and condo buildings that are home to rental tenants. This usually is the result of the building converting from rental to co-op or condo, or of shareholders or unit owners renting their units for a period of time or as a source of income.

Conflicts can sometimes arise in mixed-ownership buildings because of the different rules and standards that may apply to rental tenants and shareholder/owners, respectively. Some fully-converted co-ops—most, in fact—discourage or forbid outright the subletting of shareholder apartments, for the very reason that having a sub-set of residents in the building who are not necessarily bound by the same rules and regulations as fully-vested shareholders can lead to problems and conflict.

The Case of Mrs. Smith

In most cases, city law requires that any rental tenant who is unable or unwilling to buy their apartment in a converting building be allowed to stay in the apartment. Consider the fictional Mrs. Smith. In 1973, Mrs. Smith moved into her lovely five-room apartment on the Upper West Side of Manhattan. A few years later, the building converted into a co-op, but Mrs. Smith opted not to purchase her unit. Since then, Mrs. Smith has been paying far below market rent to the sponsor of the building’s remaining unsold shares, who is for all practical purposes, her landlord.

According to Andrew Brucker, an attorney with the Manhattan-based law firm of Schechter & Brucker PC, “When a rent-stabilized or rent-controlled tenant—sometimes called a ‘statutory tenant’—does not purchase their apartment when their building is converted to cooperative ownership by its owner, the statutory tenant retains his or her right to remain in their apartment.”

Mrs. Smith’s rent—while far less than the monthly maintenance fees paid by the residents who bought their apartments during the conversion—is put toward building maintenance and use of the amenities, which includes a beautiful roof garden that Mrs. Smith enjoys visiting every day.

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