Subletting Pros and Cons A Fair and Effective Policy is Good For All

The board of a co-op is required to perform an ongoing balancing act, weighing both the needs of the individual shareholders and the good of the whole. Nowhere is this more apparent than the controversial issue of subletting. While owners feel entitled to rent out their property as need dictates, the board must be concerned with the financial well-being of the building, questions of community, and quality of life. While a "no sublet" policy may create hardship for unit owners, too much undermines the building’s financial viability, establishing and enforcing a fair sublet policy can be crucial to keeping the peace.

Investors aside, people purchasing a co-op know that they are joining a community and expect the shared rights and responsibilities of ownership. "Boards don’t want people buying as investors," says property manager Gerard J. Picaso, president of Gerard J. Picaso Inc., a real estate management firm in Manhattan. "Originally, sublets were used when people went on a sabbatical." When the real estate market crashed in the late eighties, people began subletting apartments because they could not sell them at an acceptable price.

Varying Perspectives

Although the market is robust now, smaller apartments and those in certain areas of Manhattan and the outer boroughs are still selling at a discount. Owners who need to move for professional or personal reasons see subletting as the only way to recoup their investment. Conversely, resident owners are generally concerned that subtenants will pay less heed to issues of security and quality of life. Picaso says, "When you allow a lot of people to sublet, you take that many people out of the process of running the building."

While economic necessity drives a shareholder to sublet his or her apartment, it also encourages a board to deny the practice. Boards may find it difficult shopping around to refinance the buiding’s underlying mortage because banks consider heavily sublet buildings a risk. "Lenders are worst-case scenario thinkers, says Patrick Niland, president of First Funding Commercial Mortgage Brokerage in Manhattan. "They always assume sponsors or subtenants are going to have economic trouble or run-off." A high percentage of non-owner-occupied apartments may dictate what mortgage rate the building can obtain.


Related Articles

Can a Board Decline an Apartment Sale Over a Low Price?

Several Factors Determine Whether or Not a Transaction Goes Through

HDFC Co-op Issues: What Was Done in 2018, and What’s to Come This Year

An Advocate for HDFC Co-ops Speaks to The Cooperator

Protecting Your Reserve Funds

Prudent Investing Is Key



  • Is it common practice or within BCL for a managing agent to charge a perspective subletter a finders fee? I thought that the shareholder was supposed to satisfy that requriement to the managing agent.
  • What about a shareholder that rents out a room? They are not subletting the apt. but subletting a room.
  • If you obstruct the owners with stiff rules and regulations dictated by coop's nonvisionary and small minds, you are already crossing the border to communism and didctatorship!
  • As a cooperative owner and also on the BOD, I would like to ask if permitting subleasing should be presented to membership for their vote?
  • In a Co-op, can Board members decide that there are absolutely no short-term rentals allowed?
  • When you sublet, the coop looses the abatement and star award as the owner of the apartment gives up his laim as a perminent resident.