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With co-ops, the board basically has the final say as to who lives there. It can veto a proposed sale by a shareholder because it has fairly broad power. In condos, however, the board has less power to control sales. For the most part, a condo board can only reject you as a tenant if it exercises the right of first refusal and then buys the condo itself, and even this right is limited in some ways.
Most condos’ governing documents define the right of first refusal as the power of the condo association to buy an apartment on the same conditions and terms that a prospective buyer offers. The reasoning behind this right is to ensure a friendly and qualified community while also protecting the value of the condos. A board might exercise this right to reject a sale if it views the prospective tenant as undesirable for some reason. For example, the board may believe that the buyer has insufficient finances or is litigious. However, because anti-discrimination laws apply to both co-ops and condos, a board cannot reject a tenant on the basis of color, race, creed, gender, religion, sexual orientation, disability, national origin, or familial status.
Besides the undesirable tenant reason, a board may also exercise its right of first refusal because it believes the sale price is too low or because it wants to use the apartment itself. For instance, the condo board might choose to purchase the apartment and then sell it for a profit. It is important to remember that condo apartments are real estate, and attempts to interfere with an owner’s ability to sell the property will likely result in scrutiny from the courts. Historically, the courts have respected a condo board’s right of first refusal as long as the board is in strict compliance with the condo’s governing documents.
The majority of condo associations have bylaws that give the board 30 days after the notification of a pending sale to exercise its right of first refusal. The courts will usually not allow any attempts to lengthen that period. In addition, most condo bylaws require a majority vote of the owners before the board can exercise its right of first refusal. Thus, failure of the board to convene a meeting to obtain the majority vote, notify the seller within 30 days that it is exercising its right, or complete the transaction within a reasonable time period would thwart the board’s efforts. To combat these difficulties, a condo board may change its bylaws to empower the association to reject sales. However, bylaws can be extremely difficult to amend, as they require a 100% vote of the owners.
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