Co-ops Reap Unexpected Bonanza 
By VIVIAN S. TOY
Published: January 20, 2008
FOR years, some New York City co-ops that have retail space in their buildings have been doing the unfathomable. They have rented out their commercial space at bargain rents, and to make sure they weren’t making too much money on the spaces, they have even occasionally given back thousands of dollars to tenants at the end of the year.
They have done so because of the 80-20 rule, a federal tax regulation that requires residential co-ops to get at least 80 percent of their gross income from tenant-shareholders and no more than 20 percent from other sources like commercial tenants.
But a change in the law modified those rules late last year, and co-op boards are now busy making sure they are getting every penny possible from their commercial space.
“This change will be a bonanza for co-ops with retail space,” said Richard Siegler, a Manhattan co-op and condominium lawyer. “Co-ops will be able to take in additional income, but the real beneficiaries will be shareholders, because now that buildings can pay expenses with rental income from commercial spaces, shareholders will get lower maintenance charges.”
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