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NYC Coop (Co-op) Sublet Policy Rules Fees

Posted by Hauseit Research on November 5, 2018
| 6 Comments

Almost all co-op apartments in NYC have subletting rules which apartment owners, also known as shareholders, must follow. A typical coop building in NYC will allow you to sublet your apartment for one or two years every few years.

Most co-ops charge apartment owners a subletting fee, and it’s also customary for co-ops to require a new owner to live in his or her unit for one to two years before being permitted to sublet.

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Can You Sublet a Coop Apartment in NYC?

Sometimes. The specific sublet policies of co-op apartments in NYC vary widely by building. While most coops in NYC encourage high levels of owner-occupancy, most buildings do permit shareholders to sublet their units from time to time.

There are a number of different types of coop sublet policies in NYC. They range from outright prohibitions on all subletting at one end to unlimited subletting at the other end.

The most common sublet policy for co-ops in NYC allows one to two years of subletting after one to two years of initial occupancy by a shareholder (apartment owner).

To summarize, here is the range of co-op sublet policies you’ll find in NYC:

Most Flexible NYC Coop Sublet Policy: Unlimited Subletting

Least Flexible NYC Co-op Sublet Policy: No Subletting

Most Common Sublet Policy: 1-2 years of subletting permitted after 1-2 years of initial occupancy by the shareholder.

A typical co-op building in NYC will allow you to sublet your apartment for one or two years every few years. Coop subletting policies, rules and fees vary by building.

In most cases, the actual NYC coop sublet policy falls somewhere in the middle of those two extremes. Almost all coops charge shareholders some sort of upfront or ongoing sublet fee in addition to the standard application, credit/criminal background check, and move-in / move-out fees.

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What Types of Co-op Sublet Policies Exist in New York City?

Co-op sublet policies in NYC may include some or all of the following guidelines:

Initial Shareholder Residency Requirement Before Subletting

Many NYC coops impose an initial residency requirement on new shareholders before permitting them to sublet. This is designed to encourage owner-occupancy and prevent an influx of investors.

In the most extreme cases, a coop will not allow a shareholder to sublet unless he/she has lived in the coop for at least three years. The most common initial residency requirement we’ve seen calls for initial, consecutive residency between one to three years before subletting is permitted.

Once the shareholder satisfies the initial occupancy requirement, she or he may be permitted to either sublet for no more than 1-3 years during a 5-year period, sublet for 1-3 years during their lifetime of ownership, or sublet for an unlimited number of years.

It’s important to note that board approval is always almost required for sublets. At a minimum, a co-op will usually require a shareholder to notify the managing agent of any proposed sublet before it takes place.

Minimum Length of Sublet Term (i.e. 1 or 2 Years)

Most co-ops in NYC impose minimum lease term requirements for sublets. This is designed to prohibit short-stay tenants or guests, such as those which originate from Airbnb and VRBO. It’s quite common in NYC for both co-op and condo buildings to have anti-Airbnb policies, as many owners find short-term sublets to be disruptive to the broader building community and quality of life.

Almost all co-ops and many condo buildings stipulate a minimum sublet lease term of one year. At the less extreme end, the occasional more flexible co-op or condo building may establish a one-month minimum term or simply not provide any guidance regarding a minimum lease term. Here’s an example of a short term sublet policy for a coop in Chelsea:

Short Term Sublets are allowed, as specified in the Proprietary Lease, for a term not to exceed thirty days and for a maximum aggregate total of ninety days per calendar year. Shareholders must notify the Managing Agent of their intent to sublet at least three business days prior to the proposed start of a short term sublet and provide identification of the intended tenant as well as contact information for both the intended tenant and the shareholder while not in residence.

Lack of response from the Managing Agent before the start of the proposed sublet will be deemed acceptance of the sublet by the Board. The shareholder must be prepared to provide proof of service of the prior notice to the Managing Agent. Sanctions, including fines, may be assessed for violations as determined by the Board.

Maximum Length of Sublet Period (i.e. 1 Year)

NYC coop buildings often cap the duration of a sublet arrangement. The most common limit we’ve seen is 1 year. After the initial year expires, the shareholder and the tenant must re-apply for a sublet renewal directly with the coop board. Here’s an example of a coop sublet policy for a building on the Upper West Side:

The duration of the sublet should not be for more than one (1) year. The Board may in its sole discretion consent to further subletting for an additional period of one (1) year, if requested in writing at least thirty (30) days prior to the expiration of the current sublet agreement.

Maximum Amount of Consecutive Subletting (i.e. 1 Year)

Most co-ops in NYC impose restrictions on the maximum amount of consecutive subletting permitted before a shareholder (owner) must either move back into the unit, leave it empty or sell the co-op.

Here’s an example of a NYC coop sublet policy which officially caps consecutive subletting at two years but provides a window for the board to approve a third year:

Sublets are for a period of one year and may be renewed for a second year with Board approval. If a subtenant is approved for two consecutive years, a third year for that subtenant only may be requested.

Maximum Amount of Lifetime Subletting for Shareholders

NYC coops which cap the maximum number of years of consecutive subletting usually restart the cycle after five years. For example, a co-op may permit up to two years of subletting in a five-year period. Once the sixth year begins, the shareholder will be permitted to sublet again.

In other cases, some NYC coops prohibit all further lifetime sublets for the shareholder once he or she has used up the sublet allowance (i.e. 1-2 years).

Case by Case Sublet Policy

Some NYC coops have ‘case by case’ sublet policies, which means that sublets are only possible if there’s a very good reason. Most co-ops with this sort of policy discourage subletting, but they leave open the remote possibility of subletting for shareholders in the case of financial hardship or other extenuating circumstances.

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What Are the Typical Co-op Sublet Fees in NYC?

Most co-ops charge a sublet fee which is either a flat fee, a flat fee per number of co-op shares owned or a percentage of your monthly or annual co-op maintenance bill. Co-ops usually charge subletting fees as a way to raise revenue while also discouraging owners from subletting in the first place.

Coop sublet fees can be charged in a number of ways:

Monthly fee as a percentage of the unit’s maintenance – the shareholder is charged an additional monthly fee such as ~25% of their existing monthly coop maintenance bill.

Upfront fee based on a dollar allocation per share of coop owned – a shareholder is charged an upfront fee which is calculated by multiplying the number of shares allocated to his or her apartment by a per-share fee amount set by the co-op. This fee is usually charged upfront for each year of the sub-tenancy.

Increasing fee based on number of years of subletting – co-ops which don’t have outright restrictions on the number of years of subletting often charge shareholders an increasing fee over time. This is done to encourage a shareholder to minimize the length of time he/she sublets the unit. Here is a good example of a variable, increasing NYC coop sublet fee:

10% of annual maintenance (1st year)

20% of annual maintenance (2nd year)

25% of annual maintenance (3rd year)

Annual sublet renewal fee – many coops in NYC charge shareholders a fixed ‘annual sublet renewal fee.’

Sublet surcharge – some NYC coops impose sublet ‘surcharges’ based on the size of the unit being sublet. Here’s an example of this type of coop sublet fee:

While any sublease is in effect, there will be an annual surcharge (added to the first month’s maintenance invoice) which will be calculated on the basis of:

Studio apartment: $1,000 per year

One Bedroom apartment: $2,000 per year

Two Bedroom apartment: $3,000 per year

Three Bedroom apartment: $4,000 per year

Unauthorized sublet penalties – coops often levy fees against shareholders who engage in the practice of illegal subletting. For example, if a shareholder violates the sublet policy he or she may incur a penalty of twice the building’s sublet fee.

All of the fee structures discussed above are charged in addition to the the standard application, credit/criminal background check, and move-in / move-out fees which are levied by both condos and coops.

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Where Can I Find a Co-op’s Sublet Policy?

If you are searching for a coop online, you may have realized that listing agents do not usually disclose the sublet policies in listing descriptions. Even if they mention the sublet policy in passing, it likely won’t be very specific and may exclude important considerations such as the amount of the sublet fee. Therefore, the easiest way to find a co-ops sublet policy is to ask the listing agent or your buyer’s broker.

Coops also have other policies which vary from building to building, such as the house rules, alteration agreements, and NYC coop purchase application (board application) procedures. Given the complexity, it’s quite common to encounter NYC listing agents who aren’t fully aware of all of a co-ops various policies.

As a buyer, it’s very important that you have accurate and complete information on a co-op’s various policies before submitting an offer. It’s especially important to familiarize yourself with the co-op’s financial requirements for buyers, as you’ll need to satisfy these as a precondition for receiving board approval.

The best approach is to request all important policies in writing. This way, you can be sure that nothing is lost in translation between the co-op’s managing agent and the brokers working on a deal.

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How Is Subletting Different for Condos vs. Co-ops in NYC?

Condos are are far more flexible for of home ownership which means you typically have much more flexibility to sublet compared to a co-op. However, most larger condos in NYC still have rental rules as well as an application process for prospective tenants.

Compared to condos, coops generally encourage high rates of owner-occupancy and maintain a greater emphasis on the quality of the coop community. Therefore, coops almost always discourage excessive subletting through the restrictive sublet policies, fees and procedures we described above.

This is why coops in New York City are not generally viewed as ‘investor friendly assets’.

Condos, on the other hand, almost always have zero restrictions on an owner’s ability to sublet. Therefore, condos are much more desirable for investors who are looking for the optionality to rent immediately and/or continue renting and generating cash flow for an indefinite period of time.

Because there are more coops than condos in NYC and the latter attracts both residents and investors, co-ops are significantly cheaper than condos. If you are looking for a primary residence or pied-a-terre, it’s typically less expensive to buy a co-op.

Investors or buyers looking for a primary residence with optionality to sublet or hold as an investment indefinitely should elect for a true condo or a flexible condop, which is a hybrid between a condo and a traditional NYC co-op.

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Disclosure: Hauseit and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial and accounting advisors before engaging in any transaction. The services marketed on Hauseit.com are provided by licensed real estate brokers and other third party professional service providers. Hauseit LLC is not a licensed real estate broker nor a member of any multiple listing service (MLS).

6 thoughts on “NYC Coop (Co-op) Sublet Policy Rules Fees

  • amber
    on April 5, 2018

    If I am the owner of a co-op apt and rent it out, is that considered subletting?

    • hauseit
      on April 5, 2018

      Yes Amber, that’s correct! That’s because co op apartments are technically real property. Remember that the co op corporation actually owns the entire building, and you are a shareholder who holds a proprietary lease to your apartment. That makes you a tenant technically. So if you then rent out your apartment, you are subleasing it out.

  • Lou
    on September 4, 2018

    I am in the process of subletting an apartment in a NY coop for 1 year during which I am on a sabbatical. I am from Canada, where coops are rare, so I’m surprised at the information that the Coop Board, through the rental agency, is asking me to to supply as someone who is subleasing from a shareholder. Providing letters of reference and employment seems reasonable, but should I expect to provide my Social Security # and to supply extensive financial information? What is normally required? Can the person subletting be asked to pay the sublet fee, or is this the shareholder’s responsibility? Thank you.

    • hauseit
      on September 4, 2018

      The rental agency you’re referring to is typically referred to as the managing agent here in New York. It’s the property management company that’s a general agent of the co-op or condo board and manages the building on the owners’ behalf.

      Unfortunately, sublease applications can often times be the exact same onerous application as the purchase application. Sometimes it can be a shorter or different application. But yes, co-ops unfortunately are known to be quite intrusive and you should be prepared to reveal everything about you. Some co-ops will ask for all LLCs and organizations you are a part of, including any secret societies. You can’t make this stuff up!

      The short answer is yes, it’s common for them to ask for extensive personal financial information, along with supporting documentation such as bank statements etc.

  • Lou
    on September 5, 2018

    Thanks so much for the response. Most helpful, especially for someone coming from another country!

  • Florence Kennedy
    on December 7, 2018

    My neighbor of 15 yrs has been a subtenant to our sponser/owner with $150-200 annual Inrease and comes with 1 year lease.. this is a 52 unit APT bldg with 15% shareholders. Does my neighbor have ANY rights HERE in the County of QUEENS, my 11104, thank you for your time, do Sunnyside, ny

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