Ask Habitat: Why Would a Condo Board Want to Stop Me from Making a Sale?
Nov. 17, 2014 — A READER ASKS: My neighbor put her unit in our condo up for sale, but the board is trying to buy it from her instead of letting it go to any broker’s client. Why are they doing this? Can they do this without any repercussions?
HABITAT ANSWERS: What happens when a condominium board exercises its right of first refusal — to reject an applicant and purchase a unit up for sale itself? As long as the board meets the asking price of the seller, there is usually nothing more that's involved: A unit goes up for sale, a potential buyer is rejected in favor of the board buying the unit and the sale is completed. So when and why might this take place?
Typically, there are three reasons why a condo board will purchase a unit.
First, if the sale price is lower than what the board thinks is appropriate, the board may step in and purchase the unit itself to hold it and resell it at a higher price later.
Second, boards may buy a unit if they are concerned that the potential owner will have an ill effect on the building’s quality of life. For instance, a board may reject a celebrity who they are concerned would bring a media circus to the building.
Third, a board claim that the condo association needs the space for a super’s apartment or a community room.
A Low Blow
But the primary reason a board will exercise its right of first refusal will be to prevent a low purchase price, say attorneys. And even then, it is very rare that a board will step in to exercise that right.
If a board does choose to, then it needs to follow its bylaws to the letter to avoid problems down the road. 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.
Where boards get into trouble is when they don’t adhere to the timeline laid down in the bylaws, and make themselves vulnerable to charges that they are deliberately dragging their feet. That’s when you have to start to wonder, say attorneys: Does the board have a legitimate interest to protect, or is it being discriminatory?
Illustration by Liza Donnelly
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