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Can my co-op require me to get a certain level of apartment insurance? What happens if I don't? What are the 'typical' co-op requirements?
Most co-ops do have certain requirements of their shareholders, and it helps to understand the distinction between the restrictions you'll find in the building's proprietary lease versus the house rules, our experts say.
In general, co-op boards can impose certain restrictions on residents, including limiting their right to sublet apartments, setting guidelines around noise, and requiring them to purchase an insurance policy. Shareholders who violate these policies could even be accused of objectionable conduct and risk eviction.
But in most cases, co-op insurance requirements are reasonable.
"Co-op requirements generally are not especially onerous and serve to stop the co-op from having to act as the intermediary when water damage claims impact multiple apartments," says Jeffrey Schneider of Gotham Brokerage (a Brick sponsor.) "However, requests for personal liability coverage in excess of $1,000,000 can mean substantially higher insurance costs."
Co-ops will have master policies that cover issues like fires, vandalism, and the breakdown of machinery or damage to furnishings in public areas of the building, but this protection does not extend to your unit. You'll need to purchase policies to insure your personal property and your unit's floors, walls, appliances, and fixtures, as well as a personal liability policy to protect you in the event that someone is injured in your home or a problem in your apartment (like a leak) causes damages to your neighbors' property.
Insurance policy requirements imposed by a co-op may or may not be strictly enforceable, though, depending on where they are laid out.
If they're written in the co-op's proprietary lease, "the board would be able to enforce the shareholder obligation by threatening to terminate the proprietary lease, impose a fine or fines, or obtain the insurance at the shareholder’s sole cost and expense," says Jeffrey Reich, a partner at Schwartz Sladkus Reich Greenberg Atlas. "Conversely, shareholder insurance requirements that stem solely from a cooperative’s house rules may not be enforceable."
Because co-op boards are legally empowered to make decisions they deem best for the building as a whole, you should familiarize yourself with a building's particular set of requirements—and make sure you're comfortable with them—before committing to a purchase.
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