What Is a Right of First Refusal by Condo Boards in NYC?
Nov 12, 2023
The Right of First Refusal is a privilege that is rarely exercised by condo boards primarily
because it is exceedingly difficult to raise funds either through a special assessment or a loan
to be able to purchase a multi-million dollar condo in NYC. Furthermore, even if it were
possible to raise the funds, there would likely be severe opposition against the board from
most condo owners in the building.
This could result in unnecessary litigation within the building which costs everyone money,
uses the building’s reserves and destroys the marketability of the building!
The Right of First Refusal exists to protect condo owners in the building from non “arm’s
length” transactions at off market prices between friendly parties. For example, no owner
would be happy if one of their neighbors decided to sell their apartment at half its market
value to their family member. Doing so may legitimately confuse future buyers that the deal
was a real comparative transaction which would lower potential sale prices for everyone’s
apartments in the building!
Sample Waiver of the Right of First Refusal by a Condominium Board in NYC
[ DATE ]
To Whom It May Concern:
The purpose of this letter is to state that the Board of Managers of [NAME] Condominium
has waived the right of first refusal for the purchase of unit [X], owned by [NAMES], as
Trustees of the [NAME] Trust, for the amount of $[AMOUNT].
If you have any questions regarding this matter, please feel free to call [MANAGEMENT
COMPANY] at [PHONE NUMBER].
[BOARD PRESIDENT’S SIGNATURE]
[BOARD PRESIDENT’S NAME]
You will receive a waiver of the Right of First Refusal from the condo board after you’ve
submitted the condo’s purchase application and before closing. Not all condos require a
purchase application, and even those who do typically only require a short form to be filled
out in contrast to lengthy co-op purchase applications.
Sample Right of First Refusal Clause and Contract Language in NYC
6. Right of First Refusal:
6.1 If so provided in the Declaration or By-Laws, this sale is subject to and conditioned upon the
Waiver. Purchaser shall in good faith submit to the Board or the Managing Agent an application on
the form required by the Board, containing such data and together with such documents as the Board
requires, and pay the applicable fees and charges that the Board imposes upon Purchaser. All of the
foregoing shall be submitted within 10 business days after the Delivery Date, or, if 1.1.1 or 1.1.2
applies and the Loan Commitment Letter is required by the Board, within 3 business days after the
earlier of (i) the Loan Commitment Date or (ii) the date of receipt of the Loan Commitment Letter.
Unless the Board requires a separate submission by Seller, Purchaser’s submission of an application
shall be deemed to satisfy the notice requirement set forth in the Declaration and/or By-Laws;
6.2 If the Board shall exercise such right of first refusal, Seller shall promptly refund to Purchaser
the Contract Deposit and upon the making of such refund this Contract shall be deemed cancelled
and of no further force or effect and neither Party shall have any further rights against, or obligations
or liabilities to, the other by reason of this Contract. If the Board shall issue a Waiver Confirmation
(a copy of which shall be delivered by the recipient to the Parties promptly following receipt
thereof), the Parties shall proceed with this sale in accordance with the provisions of this Contract;
6.3 Closing shall be adjourned for up to 30 business days if the Board neither exercises its right of
first refusal nor issues a Waiver Confirmation on or before the Scheduled Closing Date. If neither Seller nor Purchaser nor their respective Attorneys shall have received either of such notices by such
adjourned Closing Date, then Seller and Purchaser each will have the right to cancel this Contract by
giving Notice (as defined in Paragraph 11) to the other, provided that, prior to the giving of such
notice of cancellation, neither Seller nor Purchaser nor their respective Attorneys shall have received
a Waiver Confirmation. In the event this Contract is cancelled pursuant to the foregoing provisions
of this 6.3, then the Escrowee shall refund the Contract Deposit to Purchaser;
6.4 Notwithstanding the provisions of the preceding 6.3 that otherwise give Seller the right to cancel
by reason of not having received a Waiver Confirmation, Purchaser will have the right to reject
Seller’s notice of cancellation for such reason, thereby obligating Seller to fulfill its obligations and
close here-under, in the event the Title Company agrees to insure title without exception for failure
to obtain a Waiver Confirmation, and if applicable Purchaser’s Lender advises that it is prepared to
close without issuance by the Board of a Waiver Confirmation, or if Purchaser notifies Seller that
Purchaser wishes to close notwithstanding the failure of the Board to issue a Waiver Confirmation,
provided that if, prior to Closing, one or both of the parties hereto receives notice from the Board of
the Board’s exercise of its right of first refusal, Purchaser’s right to close under the provisions of this
5.4 shall terminate;
6.5 If the Board’s failure to either exercise such right of first refusal or issue a Waiver Confirmation
is attributable to either Party’s bad faith conduct, that Party shall then be in default here-under and
the provisions of Article 8 shall apply.
As you can see from the sample purchase contract language above, there is no way around
the Right of First Refusal. A standard purchase contract in NYC will include language that
requires you to abide by the Right of First Refusal language in the condominium by-laws.
GETTING READY TO CLOSE however, it’s important to point out that unlike a co-op board, a
condo board does not have the power to reject you for any reason.
Just because your experienced buyer’s agent negotiated a great deal for you does not mean
the condo board can reject you. The only way they can deny you your deal is if they muster
the funds to purchase the apartment themselves. In contrast, co-op boards frequently reject
applicants because they feel that a deal’s price is too low and that it won’t be helpful as a
comparative transaction for future sellers in the building!