What does my co-op need to do to update our sublet policy?

By Virginia K. Smith | September 6, 2016 - 2:59PM

Our building is 100 percent co-op, with no sponsor. Can we decide to allow shareholders to sublease or sub-rent their apartments? If so, is it just a board decision? Or would we need to make changes in our by-laws and/or proprietary lease?

The process for updating your building's policy will depend on the rules currently laid out in your building's proprietary lease, say our experts.

"Typically a change such as this would entail modifying the bylaws and likely the proprietary lease and, more often than not, would entail a shareholder vote," explains Dean Roberts, a co-op and condo attorney with Norris, McLaughlin, & Marcus. "However, some co-operative documents allow the board to make a change such as this in sublet policy."

If there's nothing written in the proprietary lease regarding sublets, the board of directors would technically have the power to establish new policies at its own discretion, says Jeff Reich, an attorney with Schwartz Sladkus Reich Greenberg Atlas LLP. "However, given the importance of this issue and its building-wide effect, while it may not be legally required, it would be politically prudent to put such an important issue to a shareholder vote," Roberts notes.

If your proprietary lease does address the issue of subletting, says Wagner Berkow attorney Steve Wagner, "the board usually adopts a policy consistent with the proprietary lease language." For instance, if the lease allows for subletting, you could have a policy that limits subletting to three out of five years, since this doesn't contradict the existing sublease.

But if you'd like to amend your current proprietary lease to loosen the rules for subletting, your building will need to put the issue to a shareholder vote, and will typically need a 75 percent affirmative vote in order to pass, Wagner adds.

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