Board Talk: A Conversation About Owners Who Rent

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A Conversation About: Owners Who Rent

Michelle

I wonder how folks deal with absentee owners – meaning, those who rent out their units. I find that while they readily pay their monthly common charges, they are otherwise not very involved in any of the issues or work that the complex faces. They will, for example, be in contact with the renter when there is an issue in the complex, but other than that, nothing; so, when the complex paints or is running around trying to make repairs, etc., well, clearly, they are not involved. I sort of understand that if they live far away, that makes physical engagement impossible, but then that means that folks who are present (mostly the board) do a lot of work for them. What’s the resolution? Do they get charged extra monthly? Does the work get passed on to their renters, and then we should expect that work of them? Thanks.

past prez

I need you to clarify what you mean by “when the complex paints, etc.” Are you saying that the shareholders themselves do the painting and repairs? If this is the case, you are the first I have heard of. Repairs should be handled by the pros, not the shareholders. Let us know.

Michelle

Hi there, thanks for writing. Yes, I do mean shareholders who paint; that is just one case. We are having some financial troubles, so we hired a professional painter to do the bulk of the painting of the hallways, etc., but shareholders had to paint their doors, risers, etc. It was the only way to do it, and folks knew that. I am also just talking about involvement in general. Because they are not around, the communication is infrequent and sometimes, because they rent out units, their interest/commitment levels are much lower.

past prez

Ahh, that’s a horse of a different color. Actually, I commend your shareholders for pitching in. Mine would have brought down the house. I also presume there was some kind of vote for all this. That being said, ALL shareholders assume their portion of duty. If the absentee shareholder cannot do what is required him, then he should be able to pay someone else, be it another shareholder or outside (approved) person, to do his portion. The absentee can ask his renter, but you should not as the renter is, in reality, not a part of the co-op. As for their interest/commitment, it is the nature of the beast. Yes, the rest of you will have to shoulder the burden, but then the absentees do not get to have a say if things are not to their liking.

Michelle

Thank you all for this very helpful response and for laying out processes. Being a member of this forum is a lifesaver; much appreciated.

DSI

There are two separate issues here in your presentation: first, do sublessors pay a fee for the privilege? And second, do they contribute to the co-op? In our opinion, based on over 20 years’ experience, yes, the sublessors need to pay a premium for the privilege. A surcharge of 10 to 15 percent of the monthly maintenance is entirely appropriate, but in many cases will require a super-majority approval vote if it is not already a part of your original bylaws. And no, you can’t do this through house rules unless the mechanism is already present in the bylaws.

Shareholder contribution to the ongoing effort to maintain and run the cooperative [is essential]. It is my observation that the overwhelming majority of shareholders prefer to have it all done for them, and not to have to actually make an effort personally, by serving on the board or actually working on projects, committees, teams, whatever. Of the remainder, a certain percentage are not ones that should ever be on a board because they are either single-issue agenda types, they don’t get the concept of setting themselves aside for the sake of common good, have overarching issues, lack larger perspective as opposed to self-gain, or are control and power freaks.

Some sublessors are committed to their co-op, and some are truly absentee. That’s why you have a surcharge. Your subletting policy should reflect this, and you need to make the sublet applicant criteria every bit as stringent as a purchase application. Either way you are shopping for neighbors; make it count. If you involve your sublessees in your building as neighbors, then they might contribute; if you ostracize or exclude them from the building community, you get nothing.

You also need to hire licensed professionals and not turn your co-op into a do-it-yourself/home handyman project. Unless you have shareholders who are actual professionals, you will do inadequate work that will diminish the sales quality of your co-op. Your shareholders are worth more out there earning a dollar and using it to pay a pro than taking the time off to do it themselves. Not everyone can paint – it is actually a skilled job, and prep for painting is even more so.

DavidG

Hi, our governing documents allow us to charge a sublet fee – which we do, but we have kept it small at $50 a month. Note – we have restricted subletting to 3 consecutive years out of every 5.

As a board member I find that absentee owners – those who either sublet or allow family to move in under the provisions of our governing documents – are less active shareholders, less concerned, and oftentimes are not available during elections, etc.

It’s a sad situation for us because we already have a large sponsor presence, so the fewer purchasing shareholders we have occupying their apartments, the less leverage we have to drive building enhancements and improvements. We are hoping to remediate over time by encouraging purchasing shareholders to own and occupy their apartments through fees, restrictions, and assessments.Want to participate? http://www.habitatmag.com/Board-Talk