Ruth Ford, with update reporting by Frank Lovece in Co-op/Condo Buyers
A condo board can exercise its right of first refusal to reject a potential apartment-buyer in order to buy the apartment itself. It typically happens if the sale price is too low, and so the board purchases the place to resell at a higher price later. Or, the board needs the space for something like a super's apartment or a community room. Or, the board's concerned a potential owner will affect on the building's quality of life, as with a celebrity who might bring a media circus. The Business Judgment Rule protects a board's ability to make decisions for any reason, except discrimination. That covers more than just things likes race and religion. It also means people with mental disabilities.
This got hammered home in a May 2007 settlement in Young Adult Institute v. Board of Managers of The Bennett, in which the judge's decision included sentences like, "It's really not tolerable in New York City, in the United States of America, at this point in time, to stand in the way of this sale."
In August 2006, the nonprofit organization YAI/National Institute for People With Disabilities Network submitted an application to purchase two units for $1.3 million at The Bennett, a 55-unit condominium at 736 West 187th Street, completed in 2005. YAI planned to combine the apartments in order to house five young adults with mild mental retardation. After negotiations with the board that lasted through the end of October, the board rejected the application. On December 22, YAI filed suit, charging The Bennett and its management company, Tudor Realty, with discrimination under the Fair Housing Act.
According to YAI's lawsuit, seller Abbas Kashani submitted an application to the board on August 31, 2006, for the sale of the two apartments. In a letter dated September 5, 2006, Tudor Realty rejected the application on the grounds that YAI's plan to combine the units violated the condominium's bylaws, New York City zoning resolutions and the building's Certificate of Occupancy. After YAI protested the rejection, pointing out that the reasons cited seemed to contravene the state's Mental Hygiene Law, members of the board and residents of the Bennett turned out at a public hearing on the purchase. (Under the Mental Hygiene Law, all proposed group homes must be announced for public comment.)
Efforts to reach the board members for this article were unsuccessful, and Tudor declined to comment.
According to Thomas Dern, associate executive director for YAI, at the public hearing, hosted by Community Board 12 the questions coming from the Bennett residents ran from the "ridiculous" — would the residents be using the common space? — to the "offensive" — would the residents try to assault children in the building?"
Richard P. Marin of Marin Goodman, counsel for The Bennett's board, told Southern District Judge Alvin K. Hellerstein that the condo board had made no "discriminatory" comments at the community board meeting, but acknowledged that other residents of The Bennett may have.
No Right of "Worst" Refusal
The community board voted to approve the purchase. Two days later, Tudor sent YAI an e-mail requesting information about the possible impact on property values when residences for people with mental retardation open in a neighborhood. Dern says YAI supplied the information. Then, on December 12, 2006, the board announced it had found two other buyers for the units YAI wanted.
Most bylaws allow a condo board 20 to 30 days after an application for sale is submitted to either exercise or waive its right to purchase the unit. In some instances, the board may need a simple majority of unit-owners to give it the power to purchase, while in other instances, the board may need permission from two-thirds of the owners.
“In a typical situation, a condo board has a certain amount of time to process an application," points out Mark Axinn, a partner in Brill & Meisel. By not adhering to their bylaws' timelines, boards make themselves vulnerable to charges that they're deliberately dragging their feet. Does the board have a legitimate interest to protect, or is it being discriminatory?
In this case, the court found the latter, under Title 42 of the Public Health and Welfare Laws. "Every one of us, if we are fortunate enough not to have a disabled child or disabled relative, has a friend who has a disabled child or relative," Judge Hellerstein said. "They deserve the dignity of life, and we in our communities can't play the game 'Not in my backyard.' They are us as we are they. They are entitled to their lives as we are entitled to our lives, and anyone who denies them that right to life irreparably damages them."
The parties settled, with YAI agreeing not to pursue punitive damages and legal fees. After modifications were made to join the two apartments, the group home opened in September 2007. As for property values, a three-bedroom apartment listed for sale at $699,000 closed on Oct. 17, 2007, at $719,000 after potential buyers competed for it.
Adapted from Habitat March 2007. For the complete article and more, join our Archive >>
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