In a condominium, unlike a co-op, the board doesn’t have a large amount of leeway when approving or rejecting a proposed sale. A Right of First Refusal is a way for the board to step into a proposed deal on a condominium on behalf of all unit owners, instead of allowing the deal to go through.
When would a condo board use the Right of First Refusal?
The vast majority of the time the board will waive their Right of First Refusal and allow the sale/leasing of the property to progress. A couple of examples of when it would be in their interest to use their right are:
If there is a proposed sale between two family members at an extremely discounted price.
In this scenario, the building's board could buy the apartment to keep for staff, they could flip it at a higher price, or they could lease it out to a renter. The board would want to intervene in this scenario because if an apartment sells at a value much lower than the market value, it will affect the value of the whole building.
If the proposed sale is with such an objectionable purchaser that allowing them into the building could disturb the overall peace in the building or if they have a proven record of financial misdeeds.
In this scenario, the board could again use their Right of First Refusal to prevent the purchaser from entering the building as an owner.
How to discover if a condominium has a Right of First Refusal.
To find out if a condo has a Right of First Refusal you should refer to that buildings Offering Plan. It is important to investigate and discover if the building holds the right because not all condominiums do. Even some of the condos that do, only have the Right of First Refusal on their commercial units, if it is a mixed-use building.
The truth is that the vast majority of condominium sales do go through undisturbed. However, it is important to always arm yourself with all the information before a major purchase, like that of a condo. A condominium could or could not have a Right to First Refusal, so it is important to look at the buildings Offering Plan to ensure that your purchase goes through smoothly and with the outcome you’ve hoped for.
If you serve on a co-op board or condo board and need professional property management services, contact All Area Realty Services and find out why our over 30 years experience and loyal clients makes us experts.
All Area Realty Services is New York City’s leading real estate management company specializing in full-service property management for cooperative and condominium boards in the Manhattan area.