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.
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:
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.
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:
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:
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:
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.
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:
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:
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.
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.
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.
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).