NYC Co-op Sublet Policy - 2019 Buyer’s Guide & Insights

One of the most frequent questions asked when a New Yorker is interested in purchasing a NYC co-op apartment is: what is the sublet policy?

While you may plan to live in the apartment for a long time, it is important that you learn how the sublet policy will affect you as a shareholder. Before you decide to buy in a co-op, ask the right questions to understand how strict the policy is.


NYC Co-op Sublet Policy

What does it mean to sublet?

When you purchase a co-op apartment you are buying shares in the corporation that owns the building. Those shares give you a proprietary lease on your unit. If you move out and continue to own your shares, you can either leave the unit empty or sublease the apartment to another person. A sublet is simply another term for sublease.

Why is the sublet policy so important?

First, you want to understand how the policy will restrict your use of the unit. Second, you want to understand how it will affect you financially in the event you sublet the apartment.

The rules put in place by co-ops on subletting are intended to promote strong owner occupancy and low turnover. The policy may sound restrictive but the thought process for most buildings and co-op boards is that shareholders will take better care of the apartment than tenants.

The majority of co-op buyers in New York City plan to use the apartment as their primary residence and don’t sublet. So why should you care?

The rules might not affect your use as a resident, but you have to consider the re-sale potential. The more restrictive the rules of your co-op building are, the more they may deter future buyers of your unit from being interested.

Additionally, many co-ops charge additional fees if you are subletting. These fees can add up quickly. If there is a chance you will sublet, you obviously will prefer a co-op with lower fees.

Co-ops are generally not viewed as attractive rental properties for investment buyers because the sublet policies restrict the ability of shareholders to sublet the unit. Plus, the added costs cut in to any potential profits or cost offsets if you maintain ownership of your shares.

What terms of a co-op sublet policy should you ask about?

  • Minimum occupancy requirement: Many co-op buildings ask shareholders to live in the apartment for a set number of years before they are able to sublet the apartment. The most common requirement of shareholders is to live in the unit for one to three years before being allowed to sublet.
  • Minimum sublet term: In order to deter short-term rentals, co-ops require minimum sublet terms of at least 1 year. Some co-ops allow for up to a 2- year period.
  • Maximum allowance of subletting for a shareholder: Most co-ops set limits over a period of time. The majority of co-ops allow you to only sublet for 2 years out of every 5 years provided you have hit the minimum residency requirement. If you find a building that has no limit, you will be one of the lucky ones.
  • Board approval: Similar to when you buy in a co-op, the ability to sublet your apartment is generally subject to board approval. This slows down how fast you can rent your place out as you wait for approval, and there’s no guarantee the board approves the person. 

What are common sublet fees?

  • Percentage of monthly maintenance: The most common sublet fee structure is a regular increase to your monthly maintenance. This sublet surcharge can vary by co-op and can range from 10% to 30% of your monthly maintenance on average.
  • Set fee per number of shares owned: While this structure is less common, shareholders are charged a set fee. The additional cost is calculated by multiplying the shares owned by a fee amount set by the coop. This fee is paid upfront by the shareholder and is applied on an annual basis during the sublet.
  • Higher fee per year of subletting: In coops that limit the number of years you can sublet, you may be charged a variable percentage of maintenance based on the year of a sublet. For example, you might be charged 10% of annual maintenance in year 1, 15% of annual maintenance in year 2, with additional increases in future years.

Each co-op in NYC will have it’s own nuances. As long as you ask the right questions, you will receive the right information to select a building that has a sublet policy that meets your approval.

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