Ask Habitat: How Does a Condo Board Use a Right-of-First-Refusal "Designee"?

Using an actual case as the basis for an example, let's say an apartment-owner puts his or her condo up for sale. A potential buyer begins negotiating with the owner until the owner for whatever reason becomes irritated with the would-be buyer and decides not to sell to him. The owner subsequently signs a contract with another individual, and then duly notifies the board.The board decides to exercise its right of first refusal, with a slight twist: It will do so by its designee, on behalf of all the home-owners.Building Can Make Money This Way

in this case, the desginee is the first potential buyer, who had talked with the managing agent and proposed that the board exercise its right of first refusal and then assign the contract to him. He will then combine the units and incorporate a common hall, which the board would license to him for an amount based on the price-per-foot charged to other owners who incorporated hallway space.The right of first refusal is almost always in a condo's bylaws. And if nothing in the bylaws forbids assigning a designee, then a board may do so.In the real-life case, the board, by doing so, earned several hundred thousand dollars for the building by choosing a designee who wanted to make renovations, including privatizing common space, and agree to pay the board's price. The seller gets the same amount of money for the apartment, and the board reaps a windfall. Adapted from "Right of First Refusal with a Twist" by Richard Siegler, a partner in the New York City law firm of Stroock & Stroock & Lavan, and Dale J. Degenshein, a special counsel for that firm.Art by Liza Donnelly For more, see our Site Map or join our Archive >>