By Guy Arad
Q. I have an accepted offer on a condo in Manhattan, and I have a letter of commitment from my lender. Before proceeding to submit my application to the board, I was instructed by the managing agency that submission of tax returns, payroll stubs, and bank statements are necessary to process the application, in addition to the credit check.
Since the board does not have the power to deny the sale—only the right of first refusal, or finding another buyer under the same terms within a 30-day time frame—what right do they have to collect this information? I’m putting down a 30 percent down payment, and am considering submitting my application via certified mail. On the 20th day I would have my attorney send a reminder that we will be closing in 10 days if they refuse to answer—that would be the acknowledgement of their failure to exercise right of first refusal—and would allow me to close.
I hate to go that route, but will if it’s necessary. Do you have any advice on what my rights are in this situation? What options do I have? If I so forcefully gain entry into the community, (i.e., transfer of deed without going through their procedures, but respecting the 30-day right of first refusal clause), can I run into problems residing there?
— Prospective Manhattan Unit Owner
A. According to Guy Arad, Esq. of the Law Offices of Adam Leitman Bailey, P.C. in Manhattan:
“A residential unit owner who receives an offer to purchase his or her condominium unit which he or she intends to accept is typically required to give notice to the Board of Managers of the receipt of such offer. Most bylaws require that such notice state the name and address of the proposed purchaser, the terms of the proposed transaction (usually evidenced by a copy of the contract of sale) and “such other information as the Board of Managers may reasonably require..
While the Board of Managers of a condominium typically does not have the right to deny the sale—it only has the right of first refusal—the Board of Managers is, in addition to its other rights and powers, empowered to collect common charges from the unit owners, to maintain a suit to recover a money judg-ment for unpaid common charges and to bring an action to foreclose a lien on a unit for unpaid common charges.
Therefore, it is reasonable for the Board of Managers, in determining whether to exercise its right of first refusal or to grant a waiver of the right of first refusal, to request financial information, such as tax returns, payroll stubs, bank statements and a credit report, from the prospective purchaser.
Failure to provide such information will be deemed as an incomplete application to which the Board of Managers will not be required to respond. Since most bylaws provide that any purported sale of a unit in violation of the provisions relating to sales and the right of first refusal shall be void at the election of the Board of Managers, and since a title company will not ordinarily insure such a sale without the receipt of a waiver of the right of first refusal by the Board of Managers, forcefully gaining entry into the community is really not an option.
Furthermore, most condominium contracts of all sales provide that the “purchaser agrees to provide promptly all applications, information and references reasonably requested by the Board.” Failure to comply with this provision may result in default under the contract, entitling the seller to retain the down pay-ment.
The best advice is to provide complete and accurate financial information so that the application can be processed by the managing agent and submitted to the Board of Managers for its decision.”