In: Sales / Leasing Request
If your building is concerned that Shareholders or Unit Owners will possibly default on their maintenance or common charges during the period of the sublease, there is a simple Rider that the building can attach to the existing sublease application to ensure that the building is made whole in the case of a delinquency in payment.
The Rider, which we have provided for in the link at the bottom of this article, states that in the case of a delinquency by the Shareholder or the Unit Owner, the subtenant, upon written notice from the Board will pay their rent directly to the Cooperative or Condominium until such time that the delinquency is taken care of.
This Rider, with a signature by the Shareholder and Subtenant will enable the Board to collect fees that are due more quickly and all parties are aware of their responsibility in the case of a default.
Sample Rider For Coops / Condos (Word Doc)
In Condominiums and Cooperatives, one of the factors that will play into whether your Unit Owners, Shareholders or the building as a whole can easily get financing is the percentage of investor-owned units. Investor-owned, in this case, is a unit that is sublet out. If a building has greater than 15% of their units sublet out by the respective owners / shareholders, the banks will take notice and may give an issue when trying to obtain financing.
There are some buildings that don’t allow subletting at all, but most will at least make it difficult or onerous to do so. A sublet fee based on a per share basis, a flat fee or a sliding scale for different years can be put into place to create soft income for the building. The theory is that the person who is subletting out their unit is making money on the transaction, so why not also create a fee within the building.
Sometimes a Board of Directors in a Cooperative can overstep their bounds. Whether it’s from a lack of knowledge of what they can or can’t do or just a lax outlook on adhering to the building’s documents, Boards need to keep their limits in mind when making changes.
Recently, someone posed the question to the Habitat Magazine (http://www.habitatmag.com) forums asking if the Board can change the terms of the Proprietary Lease, to allow for Shareholders to now be responsible for the upkeep and replacement of windows. This was, according to the poster, done without the approval of the Shareholders at large.
The Proprietary Lease usually calls for a supermajority of Shareholders (either 66.6% or 75%, depending on the documents) to approve any changes to the Proprietary Lease or Bylaws. If there wasn’t a special meeting for this purpose or if it was not included on the agenda of the Annual Meeting, then the Board most likely made this change illegally.
We always advise our Boards to follow the law with regards to handling building documents to ensure that the rules and policies set forth are enforceable to the end.