As we mentioned in our last post, the major difference between a co-op and a condominium is the lack of property ownership for the buyer. With a co-op, the buyer gets stock in the company that owns the co-op, while also being allowed to lease housing there; meanwhile, someone who purchases a condo actually owns that particular piece of property. This gives the condo owner some freedom if they wanted to lease out their space to someone else.
For a co-op shareholder, though, the process is more restrictive -- and it has been the subject of multiple legal challenges over the past 30 years. So how does subletting work for a co-op shareholder?
Currently, shareholders of a co-op are allowed to sublet their place -- but only if they have been with the co-op for a long period of time. Newer shareholders are out of luck in many cases, with a certain year marking a cutoff in sublet privileges. The co-op board must approve these sublet decisions; but in most cases, they have complete power and control over who enters the co-op, and under what circumstances.
In this regard, New York state rules have changed many times over the years, and a number of new provisions have been applied to clarify the rules. In fact, rules that govern certain boroughs in New York City can be different too. The legal challenges have erupted as a result of what some plaintiffs call "unequal treatment" -- some shareholders get certain privileges whiles others don't.
It is important for both shareholder and co-op board to understand the issue here. The board needs to know the ins and outs of subletting rules so that they can properly handle any subletting issues; while shareholders need to be aware of the subletting protocols their co-op will place on them.
Source: Habitat, "Can a Co-op Stop New Owners from Subletting, While Allowing It for Others?," Robert D. Tierman, July 4, 2013