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Chelsea Condo Board Loses Fight Over Its Right of First Refusal

Chelsea, Manhattan

Condo boards, right of first refusal, steep discount, federal government.

The courts have refused to overturn the sale of this $51 million Chelsea penthouse apartment for just $18 million.

June 20, 2022

The right of first refusal is a trusty weapon for condo boards seeking to preserve the value of apartments in their buildings. Under the bylaws of most condominiums, the board has first shot to buy an apartment, which is traditionally done when a seller puts a unit on the market at an artificially low price. After buying the unit at the low-ball number, boards usually sell it at market value and put the profit in the building's coffers.

But sometimes it doesn't work out like that. Just ask the condo board at Walker Tower condominium in Chelsea, which has just lost a long legal battle to evict a unit-owner and reclaim the penthouse apartment he bought at a staggering discount, Crain's reports.

The unit at Walker Tower was previously owned by Middle Eastern businessman Khadem al-Qubaisi, who bought it for nearly $51 million in 2014. But he was later sentenced to prison in the United Arab Emirates for financial crimes related to the Malaysian sovereign wealth fund, also known as the 1MDB scandal. The U.S. Department of Justice took control of the apartment in a 2016 settlement to recover money as part of the global wealth fund scandal, and in 2020 sold it to Morgan Stanley’s Ron Vinder, who paid the fire-sale price of just $18.3 million.

The condo board claimed that it had the right of first refusal on the property under its bylaws. The board planned to purchase the unit from the government, then re-list it to fetch a higher price. The board sued Vinder in federal court to reverse the sale because it was priced far below market value, the board claimed in court papers, and because the sale violated its bylaws. The board feared the sale would devalue the other units in the building as well.

A federal judge dismissed the board's claims against Vinder and the federal government, but the board refiled its lawsuit in state Supreme Court in Manhattan last summer in an attempt to evict Vinder and reverse his purchase of the unit.

Last week, state judge Paul Goetz dismissed the condo board’s claims because it didn’t include the government as a defendant. The judge added that the same case had already been litigated by the board against the U.S. government in federal court, and that it can’t just refile because it "is merely dissatisfied with that forum’s decisions and seeks to re-litigate the issue in this court."

By way of throwing salt in the condo board's wounds, the court awarded Vinder costs and attorneys' fees. So not only does Vinder get to keep his under-priced apartment, he gets to keep his money as well. For this condo board, the right of first refusal turned out to be the last straw.

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