Condo Board Applications & the Right of First Refusal
Most present and future apartment-owners in New York City are aware that the process of buying and selling a home is anything but simple. Co-ops in particular have gotten a less than winning reputation; many buyers are nervous of the ever ominous "Co-op Board Interview".
The greatest fear, for co-op sellers and buyers alike, is that after negotiations, mortgage applications, lawyers fees, and countless hours of preparation, the buildings co-op board could simply choose to not approve a prospective buyer and both parties would be back to square one.
What is less well understood, however, is that virtually all condo boards can ALSO exert some measure of control over who becomes an owner in the building. This ability is given to them within their ''right of first refusal'' -- a legal clause used widely, that when applied to real estate, gives the condo board the right to, should they not like or approve of a specific buyer, have a chance to buy the condo unit from the owner by matching the prospective buyers offer (same price, terms, timeline, etc.)
Like most differences between condos and coops, the distinction between approval vs. right of first refusal lies in the differing forms of ownership. Since a co-op is a corporation, the co-op board (like the board in any company) has the final say on the rules and functions of the corporation and thus can control who is allowed to become a shareholder and thus a proprietary leaseholder. As long as the co-op does not violate federal, state or local laws against discrimination, the board is free to approve or deny prospective purchasers for any reason - and in fact does not need to offer any reason at all.
With a condo, the apartment itself is considered to be real property. By U.S. property law it is not permissible to impose an ''absolute restraint on alienation'' when transferring ownership of real estate to someone else. In more simple terms, a condo owner is not limited in selling their property to whomever they want for whatever terms they want. But a condo board may require an application to find out more about prospective tenants, and has a right to buy the property from the seller by exercising its right of first refusal if they want to block the sale. So different from a coop, a condo board may only block a sale by buying the apartment itself.
Condo boards vary widely in terms of what information they request from a prospective purchaser. Some coops simply require that they be informed the buyer's name, and they issue their waiver without a single thought. At the other end of the spectrum, a condo board may require the full panoply of bank statements, tax returns, reference letters, etc. While it is tedious to pull together, there is comfort in the fact that the board will almost invariably grant the waiver provided the application is complete.
Get more insight from the The New York Times...