State Law Nullifies Co-op Board’s Rule to Regulate Overnight Guests

When thousands of New Yorkers left the city for second homes to ride out the coronavirus pandemic, a Manhattan co-op board, concerned that shareholders were letting visitors stay in their vacant apartments, enacted a new rule: shareholders must now request authorization for any overnight guest. Did this co-op board overreach?

Though co-op boards enjoy immense powers – and the Business Judgment Rule protects those powers – boards cannot prevent shareholders from having overnight guests, replies the Ask Real Estate column in The New York Times. The state’s Real Property Law allows shareholders to have an additional occupant, provided the apartment is the shareholder’s primary residence. Overnight guests are considered occupants under the law. “You can have a roommate and you can have guests,” says Steve Wagner, a partner at the law firm Wagner, Berkow & Brandt.

Co-ops do have a history of restricting visitors when the owners are out of town, but the specifics of the situation matter: The board could certainly step in if someone is renting out their apartment on Airbnb, because the Multiple Dwelling Law prohibits rentals of fewer than 30 days unless the occupant of the apartment is present. But if a shareholder leaves the city for a few weeks and lets a friend or family member stay in the apartment, he or she could probably point to the Real Property Law as a defense, provided the apartment is the owner’s primary residence. 

“There is a patchwork of rules covering this stuff, and these rules all overlap,” Wagner says. “The law is a mess in this area.”

The problem with a blanket rule is that it ends up covering situations, like this one, that really have nothing to do with the problem the board is trying to address. Since a shareholder doesn’t need to get permission from the board every time a guest stays in the apartment, it’s possible to simply ignore the rule and make that argument if someone challenges an overnight guest. Or it’s possible to address the problem preemptively by writing the board a letter, explaining that the new rule violates state law. Therefore, since laws supersede building rules, there is no need to seek authorization for guests. The co-op board, if it has any sense, will back down after realizing that its powers, though vast, do have limits.