Although many co-ops and condos in New York City might not like it, shareholders and unit owners often rent out their apartments to subletters. Board control over subletting can vary—from stringent in most co-ops, to giving the board the first right of refusal in condos. But sometimes, residents try to sidestep the board and allow a subletter to move in. And even with board approval, having a renter, or several renters, in the building could pose problems.
Subletting in Co-ops
Co-op boards are somewhat notorious for the control they exercise over shareholder approval. The same goes for the matter of subletting, which is almost always frowned upon in co-ops.
"In co-ops, the board usually does have the right to approve or disapprove sublets. Most boards prefer to have owner-occupied apartments as opposed to a transient population. Normally banks that issue underlying mortgages for the buildings require a certain minimum owner-occupancy/investor ratio. If it's too much on the investor side, banks will typically not approve that loan, or the building will not be approved for financing or it will affect the terms of the loan. Most proprietary leases in paragraph 15 provide the board has the right to accept or reject a sublet for any reason. However a shareholder has the right to appeal that rejection by seeking the approval of the affirmative vote of two-thirds of all shareholders of record to override the decision of the board," says Ronald Sher, Esq. a partner at the law firm of Himmelfarb & Sher, LLP, in White Plains.
There are certain times when boards will make an exception and allow a shareholder to sublet, if the shareholder needs to travel for business for an extended period of time. But the board will usually limit the time a shareholder can sublet his or her apartment, as well as the number of years he or she can sublet overall.
"Boards have the right to impose certain conditions or allow sublets on an emergency or hardship basis, such as medical reasons or a change of employment, where a shareholder expresses an intent to return to the building. Boards have the right to impose and implement a sublet fee that can be calculated on any formula the board chooses, such as a percentage of maintenance fees or rent collected. They can request that the shareholder also submit a consent letter from their existing lender consenting to the sublet, since most banks who hold mortgages or loans for shareholders have a recognition agreement that requires a board to obtain the consent of a lender prior to permitting a shareholder," says Sher, who also serves as the general counsel to the Council of Westchester Cooperatives and Condominiums.