The right of first refusal is a prized tool for condo boards seeking to preserve the value of the building’s units by blocking the sale of an apartment that’s priced far below market value. But as a Chelsea condo board has learned, boards can’t afford to fall asleep at the wheel.
This lesson came home, Crain's reports, when a panel of federal appellate judges ruled that the condo board at the Walker Tower, a 22-story Art Deco tower at 212 W. 18th St., had surrendered its rights to an apartment that had been seized by the U.S. Department of Justice in 2016 as part of an international money-laundering investigation. After a buyer named Ron Vinder offered the government $18.3 million for the apartment in 2020, the condo board tried to exercise its right of first refusal.
The board has an "obligation to preserve the value of the building," the board's attorney, David Kettel, said in court papers. "A sale that is made at less than 40% of market value will also devalue the units owned by other [Walker Tower] residents by tens of millions of dollars." The board planned to buy the apartment, then re-list it at a higher price.
Too late, said the panel of federal judges. The condo board surrendered its right of first refusal after the sale of the apartment by the Department of Justice to Vinder. The judges found that there was no way to undo the purchase. The board had asked the District Court to stay the sale on the day before it closed, and it was denied.
Lesson to condo boards: when it comes to exercising your right of first refusal, if you snooze, you lose.
Co-op and condo board business broken down into bite-sized bits - 2 stories each week. Read now on all digital devices.