September2017

"While many of the governance issues involving co-ops and condominiums are identical... significant differences arise as same relate to sales, rentals, and collection of debts"

and may also include an interview. This screening may help to protect the co-op and the other shareholders from having to make up the shortfalls caused by arrears. On the other hand, it may make it more difficult and time consuming for the selling owner to find a buyer. Additionally, the governing docu- ments of most condominiums impose little to no significant restrictions on the right of unit owners to rent apartments (i.e. a typical provision may grant the unit owner the right to rent his apart- ment so long as the lease is for at least 6 months). Many co-op governing documents, however, require that the board consent to any rental (called a “sublet” in co-op parlance). The right of co-op boards to establish reason- able rental restrictions and terms and

conditions is also set forth statutorily in N.J.S.A. 46:8D-13.1 (often referred to as the “Cardinale Rule” named after the legislator who introduced the bill), which, among other things, spe- cifically authorizes co-ops to limit the number of rentals “based on lending policies of financial institutions per- taining to owner-occupancy ratios,” and permits boards to set minimum lease terms. Furthermore, the statute authorizes a complete prohibition on subleases provided that, among other things, such a policy was clearly set forth in the offering plan and has been strictly and consistently enforced. The statute prohibits “unreasonable” rental restrictions. Many co-ops that permit rentals have adopted sublet policies that, among other things, often include

provisions establishing: limits on the percentage of units that can be sublet at any particular period of time; a sublet waiting list; limits on the num- ber of sublet terms in order to avoid a monopolization of available slots by certain shareholders; and, mini- mum lease terms. While co-op sublet policies may tend to screen potential subtenants and preserve the owner-oc-

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