How to Identify and Address Co-Op Sublet Issues: A Straightforward Approach

Dear Mary:

We are an 80-unit co-op in Brooklyn Heights with a liberal sublet policy. We suspect that some of our shareholders are subletting without board permission. This costs the building money, since we don't collect the rental tax. And it may result in undesirable residents. How can we identify and correct this situation?

--Bothered in Brooklyn

Dear Bothered:

There’s a straightforward approach you can take to understanding and fixing this situation. You can use this approach whenever shareholders aren’t complying with a building policy — no matter what it is.

The first step is to define and quantify the problem. You’ve already defined it, but you haven’t mentioned how much rental tax you think is at stake. I suggest making an estimate. At the very least, this helps you confirm for yourselves that solving this problem is worth the time and effort.

Your next step is to identify possible underlying causes of the behavior you’re trying to change. Why are some shareholders subletting without board permission?

I want to emphasize how important this step is. You must tie possible solutions to underlying causes. Otherwise you’re just flailing. Have you ever found yourself “solving” the same problem more than once? That can happen if you don’t take the time to understand the source of the problem.  

To that end, let’s consider possible causes for the unwanted behavior you’re seeing. Read through this checklist of typical causes and possible actions. See where you might find a path forward.

Does your sublet policy make sense? Look at the policy you have in place, and the process shareholders should be following. Is it up to date, reflecting the current rental environment and local laws? Is it coherent? Doable? Reasonable? Or maybe it’s too liberal — good for a particular shareholder, but at the expense of shareholders collectively? Consider whether you need to rework the policy.  

Do shareholders know and understand the subletting policy and its purpose? You may have a fair and defensible policy and an easy-to-follow process. But that’s not enough. Shareholders need to know what it is, why it exists, and what to do. How do they know there is such a policy? Where is it documented? When was the last time you communicated the details to them? Did you include the why or just the what? How clear and understandable are your communications? Consider whether you need to do a better job of getting the word out.  

Do you have the ability to enforce the policy? You suspect that shareholders aren’t asking permission. Why don’t you know?  What is your enforcement approach? Do you have a reliable way to find out about a sublet before it happens? If shareholders think you can’t enforce the policy, they may feel little obligation to follow it. Consider whether you need to button down this part of your process.    

Are you actually enforcing the policy? How? If you’re not going to enforce a policy consistently — i.e., all shareholders, all instances — you may be better off not having it. Because you’re just undermining your own credibility. Equally ineffective is enforcement that consists of a slap on the wrist but allows the transgressors to still get other positive consequences. An example would be fining shareholders but not collecting the rental tax or stopping their sublet. Consider whether this is an issue you need to remedy.  

Take time to do this analysis with your board colleagues. I suspect you’ll find that at least one of these underlying causes is in play in your building. Focus on solutions, and you should see progress.