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.
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.
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.
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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December 19, 2017