Just to be clear, my email address is fordruth@mac.com. You can also contact me by cell phone: 646-701-1670. Thank you.

A Habitast article about boards that use careful judgment (eventually) vs. blindly authoritarian boards:

http://www.habitatmag.com/publication_content/2008_october/web_exclusive_adaptations/authoritarian_boards_public_rancor

We have not amended nor have we contemplated amending our sublet policy, which for our co-op is nil. We do not permit sublets at any time, crisis or not.

Even in cases where folks are having difficulty selling their units? How do the shareholders feel about the board holding the line? If you have a moment, can you contact me offline?

Ruth Ford
646-701-1670.

Folks as draconian as it may sound; the responsibility of the coop is to the corporation and the wellness of the corporation.

When does subletting end? Who sets the rules, is one enough, two, ten, twenty, etc.?

Sorry, I need to be aloof, as horrible as it sounds.

If you want to permit sublets in a co-op and the bylaws forbid such a transaction, then so be it -- no sublet.

If owners wish to permit sublets, then amend the bylaws and establish rules so that the board members can go on with the business of operating the co-op in an effective manner, rather than piecemeal, without legal standing.

Let’s think for a minute. What are the rules for subletting when no by-law permits such action? Who decides who is worthy to sublet and who is not? Do you ask for another financial package? How do you verify need? Should you? If you don’t verify then every silly or bogus request needs to be honored.

Are you jeopardizing the borrowing power of future owners and thus sales by having too many sublets? How many sublets is enough? What is the governance?

More importantly what is your co-op's legal standing? What if owners sue the board for breach of fiduciary responsibility?

Think first!!

There are too many owners that sue at the drop of a hat and I for one as a unpaid volunteer do not have time to expend my time answering frivolous and perhaps not so frivolous law suits when an owner sues because she or he has been denied or objects to sublets (per the by-laws). And, who wants to squander co-op funds defending a law suit.

My view is stick with the rules. If permitted then yes, if not permitted then no. Board members should not waive rules. These rules, however dated, exist for a good purpose and should be formally amended rather than waived or broken as the situation may dictate.

If your attorney has not counseled otherwise, then your attorney is remiss.

Our board operates as a true board as we do not meddle in the day-to-day operations of the corporation and the building.

The board has demonstrated a long term adherence to the bylaws and other attendant documents. Our owners expect a steady hand and adherence to rules, and this is what they have received. Yes, all empathize when folks are in distress.

But as noted adherence to the rules, saves us time and again when some owner feels that a refusal per the rules is unjustified and thus engages an attorney and presses a suit.

Basically, an owner must now plead that he or she wishes an exception to be made to the rules as opposed to showing that others have received a favorable waiver and he or she has not.

Now where's the burden? As a judge, how would you rule?

it is really beneficial to allow sublets - with restrictions - but allow them. it is. also this is much easier for boards that do not have members with control issues but who have forsight. all to often boards have members with issues that can make things, in fact, more difficult for a copp to function in a truly productive manner.

Sal,

You are now correct.

Amending the bylaws is the way to go, if the residents wish the corporation to entertain and operate such a policy.

In the absence of a bylaw change; it is still nil.

Unfortunately for many years we had a board who protected owners who sublet. We finally ousted this group, but are now stuck with the owners who do not want to give up thier Hotels. We are a small (100) building and have apartments that are run as a B&B. (maid etc) ... and other owners/renters have not been in the building for over ten years.

We are now going to try to vote in a Sublet Bylaw. We feel that two years with a one year emer extension is fair. Four years between each individual sublet. To discourage investors, new owners cannot sublet for two years. Also a 10% limit on the number of Sublets at any given time.

Any thoughts or suggestions are welcome.
Thank you ..HG

My building (also small) has a very generous sublet policy -- allowing a shareholder a total of 4 years of subletting. How it got to be so long is beyond me. Up until about 15 years ago, we had a no-sublet policy. Then the retrenchment in coop pricing and mortgage lending induced us to allow it to relieve the hardship on shareholders who needed to sell but could not get a buyer. The term started at 2 years, I think, and has expanded to 4 -- far longer than ought to be necessary to accommodate a temporary job reassignment or even to tide a departing shareholder over a depressed resale market.

There are some abuses. E.g., 2 apartments were rented out for the maximum 4 years, and when the maximum was up, lo and behold it became "convenient" for the owners or members of their families to move back in -- and both of them had been living in the City (I think) during the sublet. One shareholder sublet because he had been admitted to business school down South; 2 years later, after he had obtained his degree, he wanted to continue subletting, even though he was then living in NYC. The only reason why he changed his mind is that he couldn't get his tenant to pay a higher rent.

Then there was the woman who wanted to sublet because she was now engaged, the apartment was not big enough for her and her fiance and they were now living in larger, rented quarters elsewhere, but she wanted to hold on to (and sublet) her apartment in our building "in case things didn't work out."

Or the couple who bought the apartment for their college student daughter, who lived here the minimum 2 years and then decamped for Los Angeles, where she had gotton a job. The parents sought to sublet, saying that they had intended to use the apartment as their pied a terre when their daughter moved out, but they now found themselves not as close to retirement as they had thought they would be. They've been subletting for 2 years -- so far.

The maintenance rate is far below the rental value of apartments in our building, and I can't help but think that shareholders wouldn't be subletting at all, much less for so long, if they weren't making a profit off it. This is a small building (110 apartments), and we have trouble getting people to run for the small board (of 5), as well as to do the things around the building that have always been done by volunteers, such as gardening our tree pits. The presence of subletters exacerbates both problems.

If you have 110 apartments and are having trouble getting 5 people to serve on the board, you building has issues that go way beyond a handful of apartments being sublet.

The supposed horror stories you cite -- it's hard to comprehend any problem. You mention someone subletted for the 4-year max, and then the owners/family-members moved back in. And the problem is ... what?

You mention a parent-owned apartment, with a daughter who moved to L.A. 2 years ago, and the parents are ... only halfway through the allowed 4 years. What is the problem???

I read this thread about subletting, and most of what I see is knee-jerk hysteria and the throwing of labels. It's like a Sarah Palin rally.

Before you start accusing others of hysteria and "label throwing" like participants in a Palin rally, you should look at your own behavior. These gratuitous insults sound like a McCain tactic -- character assasination -- made all the worse by the fact that they were delivered anonymously. It's just this sort of abusive rhetoric that poisons discourse in this forum.

Putting too many and putting too few (or no) restrictions on subletting can both cause problems. With too many, SHs can get tied in a strangle hold. With too few (or none), SHs always find ways to "abuse the privilege". Either way, the board has to sort out issues case-by-case and deal with complications or complaints that arise. This can be avoided to a great extent if rules and guidelines are in place and enforced properly.

If subletting is allowed, the best way (IMO)to handle it is to establish the clearest, most complete set of sublet rules possible - rules that are fair and consider the needs and best interests of SHs, their neighbors, and the coop as a whole. Send all SHs a memo or a "Coop Rules For Subletting" document that spells everything out, and advise them to keep it for future reference.

Make sure (as best you can) that everyone is on the same page and understands what is and isn't permitted. A memo or document with a short intro (or short cover letter) and the rules outlined in bullet points is a good way to make this easy for SHs to grasp.

Be clear and be specific. For example, the rules should state:
-- If a sublet application package and board approval are required for new sublets
-- If an application form and board approval are required for every renewal period (this can be short with just basic info - renewal lease dates, where the tenant works and his work/cell number, etc.)
-- What sublet lease periods are allowed (e.g., 6 months or 1 year only at a time)
-- How long subletting is permitted (e.g., for a 5 year max, then no more - or - with no limit but with board approval required for every new and renewal sublet)
-- If there's a residency requirement (i.e., if a SH must be a resident for, say, 3 years before any sublet of that apt is permitted
-- The sublet fee for new and for renewing tenants (it's a good idea to have fees)
-- Any fine for "invalid occupancy" - if an unauthorized person is living in an apt or a tenant remains after his sublet period has expired without a board approved renewal

Above are examples of what rules should include. The board of each bldg has to get together, carefully consider what rules to establish, and impose fines or take some type of action if there's non-compliance.

You want to be fair to everyone and rules are necessary, but rules with no follow-up or no ramifications if they're ignored are no rules at all.

Have a subletting game plan, set rules for it, be proactive if rules aren't followed, and a lot of problems can be eliminated.

Sorry, I accidentally forgot to fill in the sender line on my post here that begins with putting too few or too many restrictions on subletting, and I clicked "response" before I realized that I did this. My apologies.

BP

My compliments to Anonymous -- he or she shows exactly the kind of thoughtful, nuanced leadership that any organization needs.

Anyone can blindly follow draconian, authoritative rules that try to fit all human behavior and needs into a "one size fits all" form that doesn't account for a range of human and economic realities.

True leadership is hard work. If showing judgment and wisdom is too tough, than let someone else lead. As with Mayor Bloomberg and the City Council's term-extension power-grab yesterday -- slapping 89% of referendum-desiring New Yorkers in the face -- it's the height of hubris to think that "I and only I can run this co-op. No one else is capable."

I do understand the cons of subletting, but it's hard on SHs who relocate, can't sell quickly, etc. if they can't sublet. It can also be hard on tenants if a sublet has a cap of, say, 2 years. Why make them have to find a new place when they've just started to build a life where they are?

If a coop has a policy stating that sublets can only be for 6 months or 1 year at a time and every renewal requires board approval, tenants who cause problems or don't obey the rules can be denied renewal. A cap on sublet renewals could be set at, say, 5 years. Many tenants (even many SHs) wouldn't stay that long. They'd marry and need a bigger apt, relocate or whatever but it would provide some sense of "permanence" while they are in a bldg. Flipping tenants in and out in the short term also adds to a hotel or revolving door mentality which is what coops typically don't want in any case.

Having SHs as residents is usually deemed preferable. We have a policy stating that no more than 20% of apts can be sublet at any one time so we're not overrun with tenants and that's never been a problem for us.

Sublets can also be a good source of income for a bldg, especially one that doesn't have many/any other ways to generate it. We have a sublet fee for all new AND renewal sublets equal to 2 months maintenance, and we only allow sublets for 6 months or 1 year at a time, so this does bring in income. It can also be thought of as a way of discouraging over-subletting because some SHs won't want to pay that fee for every new or renewing tenant. If the average fee was, say, $1200 and a bldg had 10 sublets, that could bring in $20K a year.

Just wanted to express a few thoughts on the pros of subletting. Thanks.

Harold - remind me not to live in your building. sounds like you have inflexible and limited thinking there.

All should remember, if you make an exception once, then every other owner will ask for an exception to the rules.

Even when we don’t make exceptions, we are accused of making exceptions.

In the long run, it is always better to not make exceptions. Why? Who wants to take the time (at the pay you receive from the coop) to examine and reflect upon each exception request and to then have an attorney prepare the appropriate documents.

And, who wants to expend valuable time to defend challenges to refusals to grant exceptions? Isn’t it easier to say we have never granted an exception?

This is especially true as so many co-ops have a revolving door for board members and what the board did today and the reasons will be lost, but someone will remember that an exception was made.

And as for not living here, hmmmm??

We have no mortgage as our fiscal plan over the last twenty-five years has had but one thought e.g.: retire the debt without refinancing. Along the way we have also made considerable ($millions) in capital improvements. And for a luxury building, we are one of the lowest cost buildings in our area for similar luxury buildings.

Oh, did I mention, we are almost 100% resident ownership with just a few sponsor units occupied by protected seniors renting. Yes, less than 2% of our 500 units are in the hands of the sponsor.

Perhaps if others did not try to run popularity contests for board membership and adhere to total fiduciary responsibility there wouldn’t be so many co-ops in fiscal distress.

And, let me add that my analysis of many coops in my area and there readings herein cause me to opine that many boards are naïve as the folks have never run a corporation.

in fact our building never has any problems with sublets and often th renters are more considerate than the owners. it is also a very nice convenience for owners who need the $ or get posted away for a while.

I'm appalled by the self-righteousness of this board-member's replies. ("Oh, did I mention...?" How nasty and smug.) To hear him put it, any breach whatsoever in the wall of subletting would result in fiscal chaos.

First, that kind of false dichotomy wouldn't be stood for in freshman debate.

Secondly, leadership requires using judgment and knowing that in business as in anything else, there is no one-size-fits-all solution. That is authoritarianism, not leadership. Given the economic downtown, for example, what happens if a newly unemployed owner has trouble making payments, and can't find a buyer? Harold, judging by his statements, would rather see the apartment go to foreclosure than allow a renter that the owner might be able to find as a stopgap measure.

And incidentally, the correct grammar is "fewer than 2% of our 500 units," not "less than 2%..." -- the units are discrete entities. Less sand, fewer grains of sand.

Our building consisting of 58 units converted to a co-op in 1982 and we had an unlimited sublet policy until 1998. In 1998, the co-op board decided to impose a 2/5 sublet policy.
When this policy was implemented, it encouraged owners who were subletting their apts continuously to sell after the 2nd year. Consequently, the number of sublet apts dwindled to less than a handful, to 3 or 4.

The board decided in 2006 to amend the 2/5 policy to 3/5 (three consecutive years out of five) policy to allow shareholders more flexibility. At this time, the board decided to increase the sublet fee. This more flexible policy has not increased our sublets.

Today, our co-op is 100% occupied by our shareholders.