Buildings with liberal sublet policies?

Keep in mind that even if a sublet policy is liberal today it could easily change tomorrow. Boards are capricious. I'm familiar with a couple of buildings that recently toughened up their sublet policies, much to the chagrin of many shareholders. If you want certainty don't purchase in a co-op.

Bramster:

1. what buildings

Co-op board president here. You realize that the whole reason of buying into a co-op is to not share a roof with a building full of transient renters, right?

Why on earth would any co-op allow "unlimited" subletting?

>Co-op board president here.

Is this a position that can be transferred building to building?

If you need flexibility to adapt to changes in "life circumstances", then you should be renting, not buying.

Buying is for people looking to permanently set down roots.

>Why on earth would any co-op allow "unlimited" subletting?

Because they want responsible owners who care about the building, and have made a lifelong investment in it but find themselves having to live somewhere else for a number of years (job transfer; overseas posting; kid's education; etc.) to come back and live there again rather than having to sell and bringing more unknown new faces to the community. Better to have a renter in for a few years and then back out again.

Hello trip: Good point, except that it does not extend to "unlimited" subletting.
"...have a renter in for a few years and then back out again" (at which time, the shareholder must move back into the co-op apartment for another year or two before subletting again).

Why would a kid's education require a move?

And again, we have a living situation for transients: it's called "renting". Buying simply isn't for everyone. Most co-op boards don't see living like a gypsy as fitting their idea of being a "responsible owner" who "cares" about the building.

NYCMatt: "a kid's education is not a good reason for moving out of a co-op and subletting it, until when?)
I agree and perhaps the time to buy for those with that reasoning, is after the kids are out of school and living on their own.

----Because they want responsible owners who care about the building, and have made a lifelong investment in it but find themselves having to live somewhere else for a number of years (job transfer; overseas posting; kid's education; etc.) to come back and live there again rather than having to sell and bringing more unknown new faces to the community. Better to have a renter in for a few years and then back out again.----

Yes on the first part of the beginning sentence, a resounding no on everything else. As a board member myself I can say we do not look favorably on applicants who indicate intention to sublet in the future. Sure, circumstances change and everyone understands that--this is why sublet policies exist in the first place. But we'd rather not have someone who expects to occupy the apartment only until, say, the kid hits middle school or for an interim period between overseas assignments. "Unknown faces" as you say are transient subletters and I'd far rather a new shareholder move in than have a series of transients come through every year.

"... but find themselves having to live somewhere else for a number of years (job transfer; overseas posting; kid's education; etc.)..."

That's when you SELL.

This is all true, Sam.

If you think you are likely to want to rent out (sublet) in the future, do not buy a co-op. Buy a condo or rent.

Be advised there are agents who like to recruit people like you to buy from their list of "sublet friendly" buildings.

And yes there are even a few co-ops that brag about how they allow subletting. I think both are almost scams.

Because the above posters are 100% correct. It's because of the legal structure that makes a co-op a co-op.

What I know happened in one case, in a building on the Lower East Side, when the nabe became fancier and pricier, the co-op board composition changed (membership can change fast, just one election) and they immediately ended subletting, forcing investor types to sell or bleed cash flow.

So on top of all the risks you already take on when you purchase shares in a co-op, you also take on the risk that you will not be able to sublet when you desperately need to do so.

samarab please feel free to contact me. I've been specializing in this type of sale for many years -

samarab please feel free to contact me I've been specializing in these for many years.

There are quite a few co-ops and condops that allow unlimited subletting after a year or two of ownership. They have had these policies for decades without any problems. Many of these buildings have a higher concentration of studio and 1 bedrooms which by nature tend to have higher turnover to begin with. It's anecdotal, but I see more cases of tenants purchasing from their landlords in these buildings, or purchasing units within the same building when they become available. What's great about these buildings, and the OP is asking about them, is because they aren't priced that much higher than other co-ops.

There are condops that are run exactly like condos, so no board approval, allow foreigners, and allow unlimited subletting from day one. The only difference is they don't allow corporate ownership. These tend to be priced higher, but still considerably less than a comparable condo.

There are also some co-ops that allow investors and unlimited subletting from day one. These buildings usually require all-cash due to the number of investors or because the sponsor or another investor owns more than 10% of the units. There are also co-ops where the board allows the transfer of "holder of unsold share" rights and so those apartments can be sublet from day one. Not what the OP is asking about, but they're out there, they're not scams, and they can work for investors or all-cash owner occupants.

I don't know of any co-ops or condops that have reversed their policies, or made them any less liberal, so I'm curious about the buildings mentioned by other posters. My guess is they are much smaller buildings where the ratio of investors to owner occupied has gotten close to or surpassed 50%, which is the cutoff for financing for the majority of lenders. That should be a bigger and more likely concern than a board reversing an open sublet policy. But that's a concern in many condos as well. In many of these co-ops and condops you'll find the ratio of investor to owner occupied isn't much higher than in comparable co-ops with "traditional" sublet policies. If it is, (and it's easy to find out) then you can steer clear.

--I don't know of any co-ops or condops that have reversed their policies, or made them any less liberal--

310 RSD is one such building--lots of studios that shareholders would sublet indefinitely. It tightened up its extremely liberal sublet policy within the past year. There are a couple of other buildings I'm aware of that have also reassessed their policies within the past several years.

Bottom line--you cannot count on sublet policies of any particular building to remain intact. They can, and probably will, change.

My building is a small co-op that does allow subletting and we are actually discussing the topic for changes right now.
While kicking around ideas as most want to allow owners some freedom, allowing unlimited rental is just not fair to others.
Particularly if someone never rented, now wants to, but cant because combined with other rental units puts the building over the owner occupied threshold with banks.

I am proposing a poison pill idea where if you rent out, year 1 the co-op gets an additional 15% of the unit's maintenance for a fee.
Year 2 is 30%
Year 3 is 45%
and so forth
At end of any lease owner must re-occupy for at least 2 years.

"I don't know of any co-ops or condops that have reversed their policies"

Jason you must not get around that much. MY building has done this, and I personally know of at least 7 others that have done so over the past three years or so. Many, like mine, have adopted the "poison pill" system that truthskr just mentioned: gradually increasing the monthly fee for the co-op up to a maximum of three years, after which the owner must re-occupy (or simply not lease out) for the next three years.

truthskr also brings up a very important point: a co-op building allows "unlimited" rentals at its peril if it expects to allow its shareholders to carry mortgages. Too high a percentage of renters, and any prospective buyer in the building now can't get a mortgage.

Matt - I get around just fine, but not that often to Washington Heights. All the buildings I know of are below 96th Street. And I was the first to bring up the owner occupied threshold for financing on this thread... just sayin.

There's another poster here (lad, i believe is his name) who is president of a co-op that had to drastically change their sublet policy. I believe they had a financing scare. It's not just an issue of individual unit buyers obtaining mortgages if there are too many renters, it's also an issue of refinancing underlying mortgages. If you can't get a lender when that comes due, I assume every owner has to pony up their share of the underlying loan in a major assessment. So, the issues of sublet policies are layered.

That said, I have a few friends who own in London Terrace in Chelsea--their policy is pretty permissive. Two of them have been subletting for years without any problems. Perhaps that building is so large they always have enough owner residents to mitigate the sublet percentages. You might check that co-op out.

You should consider Executive Plaza at 150 West 51st Street. Minimum 1 month rental term, and it's the ideal option for an owner that wants to live in the apartment certain months, and rent out other times. Low common charges also make this an attractive option. You can contact me directly if you have any questions about this building - mwang@esp-ny.com

The "holder of unsold shares" rights is absolutely not available to the casual investor. For those who don't know, that means transfer of sponsor rights, which also means taking on sponsor obligations.

Flut--my understanding is it is possible to negotiate sponsor rights in a sale of a sponsor unit. But it'll cost.

Jason … aside from MY building, I was referring to at least SIX other buildings -- two on Lower Fifth, and four Downtown.

Last I checked, those were all "below 96th".

The "take-away" from this discussion thread is:
bramstar and Matt don't want no scrubs.
That's how it is in most co-ops.