Pros and Cons: Condo Subletting

As you establish your condo association governing documents (or review and amend them) one issue you are likely to face is the question of subletting condos. Subletting is one way the owners of a condos can create income. They do this by renting out their condo to third party tenants, often referred to as sublets. These agreements are attractive to people in many situations due to their flexibility and their informal nature. However, it is a good idea to address condo subletting in the condo association governing documents. Unregulated subletting can lead to an unappealing situation in a condo complex.

What is Condo Subletting?

A condominium complex is governed by a condo association made up of the owners of the condos. These community members live in their respective condos and volunteer or are elected to serve on the condo association board. However, some condo owners choose for various reasons to live off campus and rent their condos out to tenants. A good way to think of subletting is like a rental apartment agreement with a landlord and a renter. The owner of the condo acts like a landlord, while the sublet acts similar to a renter. Sublet agreements can be either short or long-term, allowing for flexibility and rapid change of the parties actually occupying the condo.

Advantages of Subletting

There is a strong argument to allow subletting in your condo complex. By allowing units to be rented, many foreclosures can be avoided. Often condo owners will sublet when they can’t make the payments. The fewer foreclosed units, the more collectable assessments the association will have. It does not benefit either the bank or the association to have a foreclosure. A high percentage of foreclosed units will decrease the property value of an association. Additionally, although most associations handle foreclosed units well, reducing the amount of empty units may reduce squatting and burglary.

Disadvantages of Subletting

On the other hand, there are some reasons to consider not allowing subletting. When a tenant moves in or out, there is inevitably an increase in noise and property damage. The constant presence of movers reduces the feeling of stability many condo owners seek in their association. Also, a tenant is likely to not take care of facilities as well as the owners would. They are also less likely to be acquiescent of association rules. Overall, tenants are less motivated to be invested the long-term well-being of the association community (as are the landlords living elsewhere).

It’s important to weigh the pros and cons as you decide how to handle this situation. No matter what you choose, having a clearly defined policy will always come in useful in the long run.

If you are reviewing your condo governing documents and would like to learn about subletting and the effect on condo insurance, please contact the H&K Insurance Agency. We would love to help you review your policies and help you ensure you are fully covered for the many risks condo associations and owners face. You will find our expert help to be essential to procuring coverage and policies for New England condos.