Why “The First Right of Refusal” is a Terrible Clause to Put in Condominium Documents.

Many associations throughout the United States have in their condominium by laws a right of first refusal. A right of first refusal requires the seller of a unit within a condominium association to offer the association the first right to purchase the unit under the same terms and price offered by a buyer.

The right of first refusal has a long history rooted in discriminatory behavior. The right of first refusal when first implemented, made it possible for an association to prevent a particular buyer from purchasing in the association by exercising the right to purchase it first.

It is rare that you will find an associations’ governing documents that does not have a first right of refusal. Even more rare is finding a case where an association actually exercised the right. Most condominium associations have their financial hands full collecting enough money to cover the deferred maintenance and continuing operations of the associations. Moreover, the real estate and mortgage meltdown led many associations to write off significant unpaid monthly dues, further exacerbating their already frail finances. The reality is that associations just are not in the financial position to exercise the first right, which begs the question. Why haven’t they stricken the language from the documents?

The cost and headache to undertake an amendment is the primary reason. In many cases, a vote of 75% of the owners is required to amend the by laws, with no guarantee how the vote will come out. In addition, most board members have no idea as to what effect on financing the existence of the right has. The worst consequence of having the first right in the condominium documents is that it prevents VA approval. This translates into Veterans being unable to purchase in the vast majority of condominiums in the United States. Making matters worse is that the vast majority of condominiums in the country are not approved, further whittling down the housing choices that we should be expanding, not limiting.

A good start would be legislation that outlaws these clauses that are almost never exercised. This country doesn’t do a lot for those people who have put their lives on the line for this country. The least we can do is to is make it easier for them to have a nice place to live.

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