A New York City condo board has limited ways to exercise control over sales in the building (unlike a co-op board, which has much broader authority over deals). But condo boards have what is called the right of first refusal. This is an option to buy a condo from a seller at the same price as the sales contract.
Condo boards are typically keen to waive this right—with a waiver—and let the sale go ahead so it is very rare for a board to exercise the right of first refusal, although it is possible.
[Editor’s note: A previous version of the article ran in March 2023. We are presenting it again in case you missed it.]
Michael J. Franco, a broker at Compass, says the right provides protection against fire sales, short sales, or a foreclosure by allowing the condo board to buy at the lower price and resell it at a fair market value, “creating funds for the condo and maintaining price comparables for the neighbors.”
If a condo is sold well below fair market price it can lower the sales price of other apartments in the building.
Steven Goldschmidt, director of sales at Coldwell Banker Warburg, says his own board exercised its right of first refusal 15 years ago because a condo contract was well below market and the sale was thought to be underhand. “We stepped in and were able to turn a $75,000 profit” reselling the place, he says.
Goldschmidt points out that the right of first refusal should eliminate the need for condos to require the kind of board packages requested by co-ops.
“Condo boards forget that they only have two choices, to exercise or waive the right of first refusal,” he says.
Even so, condo board application packages are often as comprehensive as co-op ones. His point is that if a condo is not prepared to step in and buy the apartment, they can do little else than issue the waiver.
Co-op boards can reject a buyer and don’t have to give a reason—although it cannot be discriminatory—making the right of first refusal largely unnecessary for co-ops. In theory, a co-op could make amendments to the building’s governing documents and add a right of first refusal to their bylaws if the shareholders and the board wanted.