Eliminating Illegal Sublets

Hankin & Mazel
Geoffrey Mazel, Partner

We represented a board for which illegal sublets were becoming an increasing problem. The proprietary lease for this cooperative corporation stated that all sublets must be made only with board approval. The cooperative was fairly large, and some shareholders were subletting without board approval and without even notifying the board. The board decided it was time to take some action. The first step involved some due diligence on behalf of the board, which included: reviewing the addresses on checks submitted for maintenance; making phone calls to shareholders; and sending warning letters to shareholders and occupants in units that were suspected of being sublet without permission. These warning letters were a great help in vetting the units. As for those shareholders who did not respond, the board even went to the length of hiring a private investigator. Upon completion of this process, the board was able to get a grasp of which units were being sublet and even gave the shareholders’ amnesty in submitting an application for approval. As for the shareholders not in compliance at this point, our firm served a notice to cure and started the litigation process.

Legal Lesson

The lesson learned from this situation is that if a board acts in a coherent and reasonable way, a long-standing problem can be resolved. In this situation, the board did not act too quickly or rashly. Starting the process with sending a simple letter was a tremendous boost to the process. The letters included the occupants of the units who had no idea they were even occupying the units without necessary board consent. Another prudent move by the board was to have an “amnesty” program and allowing the shareholders to cure the illegal sublet. The advance notices and the amnesty program brought many shareholders into compliance without resorting to any litigation and incurring any legal fees. At the end of the day, only one or two shareholders were the subject of litigation. The word got out in the cooperative that the board was serious about enforcing its rights regarding sublets, and they have been operating without incident for the last few years.