—Storeless in the Bronx
“There are several issues to consider with regard to the operation of a grocery store on the co-op premises. As always, one must look to the operative documents of the co-op, i.e. the proprietary lease and bylaws,” says Stephen Lehrman of Lehrman, Kronick & Lehrman LLP in White Plains, a firm specializing in condo/co-op and landlord/tenant law. “Generally speaking, designating the community room as a ‘store’ could be done by a vote of the board and would be similar to the board creating a storage area out of an otherwise unused common area. No shareholder approval would be required. In addition, as long as the ‘store’ served only co-op residents, the 80/20 rule would not come into play since any income from the store would not be considered commercial income.
“There would be, however, various other problems to consider. First, operating such a facility on co-op premises would probably require permits from the appropriate municipality which could include the necessity of a new Certificate of Occupancy for the use, Health Department permits, Fire Department Permits, etc. Second, the storage of perishable items might require the installation of refrigeration equipment and other specialized equipment that might be quite expensive. Third, such a facility would require a person to be present when it was open and finding a volunteer to staff the facility might be difficult. Fourth, operation of such a facility would undoubtedly require additional insurance coverage, which would further increase the cost.
“For a small property, it does not appear that such an operation would be cost effective and the occupants who did not use it would, in effect, be required to subsidize its operation through higher maintenance charges. Also, the cost of construction might very well require an assessment. A better solution might be to arrange to have a local grocery store deliver the food items for a small charge or to lease the space in question to a vendor who would be required to comply with all construction and permitting requirements at his expense. In such a case, the rental income would then be considered commercial income but it is unlikely that the 80/20 rule would be triggered unless the building had other commercial income.”