Can you sublet a coop in NYC? What are the rules for subletting a NYC co-op? Are there any fees for subletting a coop in New York City? If you are considering buying a coop in NYC, it’s important that you are aware of the rules and restrictions imposed by coops for sublets here in NYC before you begin submitting offers.
If you are searching for a coop online, you may have realized that listing agents do not usually disclose specific coop sublet policies on listings. 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. Shockingly, as you search for coops you may realize that some inexperienced NYC listing agents don’t even know some or all of these policies!
Coop purchases in NYC are rather complex, and given the fact that a seller usually pays the same commission even if a buyer is unrepresented, there’s very little reason for you as a buyer to not work with an experienced buyer’s agent.
Can you sublet a coop 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 NYC coop sublet policies, ranging from outright prohibitions on all subletting all the way to unlimited subletting.
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.
In most cases, the actual NYC coop sublet policy falls somewhere in the middle of those two extremes. Almost all coops will also 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.
What types of coop sublet policies exist in New York City?
Coop sublet policies can include some/all of the following guidelines:
Initial shareholder residency requirement before subletting
To encourage owner-occupancy and prevent an influx of investors, many NYC coops will impose an initial residency requirement on new shareholders before permitting them to sublet. 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, he/she 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. Note that board approval is always almost required. At a minimum, coops will require shareholders to notify the managing agent of any proposed sublets.
Minimum length of sublet term (i.e. 1 or 2 years)
Most coops in NYC will impose restrictions on the minimum time of a sublet in order to discourage ‘short term’ sublets which fellow owners may find disruptive to the community. The most common minimum lease length is one year. Although NYC coops most often encourage longer term sublets (1-2 years), the occasional coop will permit short term sublets.
Here’s an example of a short term sublet policy of a coop in Chelsea:
Maximum length of sublet period (i.e. 1 year)
NYC coops will 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 usually needs to 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:
Maximum amount of consecutive subletting (i.e. 1 year)
Most coops in NYC will impose restrictions on the maximum amount of consecutive subletting before a shareholder (owner) must either move back into the unit, leave it empty or sell the unit to another buyer.
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:
Maximum amount of lifetime subletting for shareholders
NYC coops which have caps on the maximum amount of consecutive subletting will often restart the cycle after a five year period. For example, coop 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, NYC coops may ban all further sublets for the shareholder once he/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 with approval by the board. Most coops which have these sorts of policies discourage subletting, but they leave open the remote possibility of subletting for shareholders in the case of financial hardship or other extenuating circumstances.
What are the fees for subletting a co-op (coop) apartment in NYC?
To discourage subletting and to provide an additional source of revenue for the building, most coops charge shareholders a fee for subletting a unit. Coop sublet fees can be charged in a number of ways:
Monthly fee as a percentage of the unit’s maintenance – under this arrangement, the shareholder will be 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 – under this structure, a shareholder will be charged an upfront fee which is calculated by multiplying his/her number of shares owned by a fee amount set by the coop. This fee is usually charged for each year of the sub-tenancy.
Additional NYC coop sublet fees:
Increasing fee based on number of years of subletting – coops 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:
Annual sublet renewal fee – many coops in NYC will charge shareholders an 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:
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/she may incur a penalty of twice the building’s sublet fee then in effect.
The above fees 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.
What is the difference in sublet policies between a condo and coop?
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, coops are significantly cheaper than condos. Therefore, if you are looking for a primary residence or pied-a-terre we suggest you buy a coop. Investors or buyers looking for a primary residence with optionality should elect for a true condo or a condop, which is a hybrid between a condo and a traditional NYC coop.
To learn more, we encourage you to read our comparison of coops vs condos in NYC.
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).