Rentals in 10021>Question Details

Jjjling, Other/Just Looking in 10021

Does it need bank approval for renting out a co-op apartment?

Asked by Jjjling, 10021 Wed Aug 3, 2011

Due to personal needs, I must rent out the co-op apartment in Manhattan and rent a cheaper and big apartment else where. I found a potential tenant who is willing to rent it. We prepared all paperwork. All of sudden, the managing agent of the building asked me if I have the approval letter from the mortgage bank. I called the bank requesting the letter. I was informed the bank does not allow a primary residence to be rented. i went back to the managing agent and the board asking their permission to rent. It was rejected citing "it is the bank holds up the process". I even wrote a letter telling them the difficult financial situation I am in. They are not flexible in this matter at all. A family, three of us, are currently stuck in a studio. I am wondering if requiring bank approval is a "house rule" of the co - op or is it for all co-ops?

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I just got a response from a direct lender who said that banks will not lend on "investment coops in general" and only lend on a condition that this is used as a primary residence. If your management company insist on the lender signing off on your sublet, there is no way around it. May be you could speak to the lender and see if you prove a hardship to them, may be they can allow to sublet temporarily until your financial situation improves...
1 vote Thank Flag Link Tue Oct 16, 2012
I've run into this issue often when representing shareholders in co-ops who wish to sublet (since as a co-op owner you are a proprietary tenant of the co-op corporation, your renter will officially be a "subtenant" and thus you are subject to the rules set by the co-op corporation your "landlord").

Many co-ops prohibit sublets by shareholders who currently have mortgages on their units unless approval is obtained from the lender, and in some cases it does take time and effort to get the needed lender approval.

As the previous respondent advised, I'd recommend speaking again to your lender to see under what conditions an approval to sublet could be granted.
0 votes Thank Flag Link Mon Aug 22, 2011
Hi Jjjling,

Your coop is protecting their investment and most banks do not allow this practice ( if they are aware about ) and in your case the building insists on this approval.

Typically you as a purchaser will get a better rate by purchasing as primary residence vs. investment. Speak to your bank again, they may adjust your terms, higher rate, some sort of a penalty. Explain your situation in full.

As for your building requirements, I adivse not to wonder and instead get a copy of your house rules and review them.

Good luck to you.
0 votes Thank Flag Link Thu Aug 4, 2011
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