Leni Cummins discusses condo boards’ right of first refusal in Habitat Magazine’s Condo Ownership column. Condo boards face unique challenges compared to co-op boards because they lack the authority to reject buyers outright. Their only legal option to block a sale is to exercise their right of first refusal, which requires them to purchase the unit themselves – a step that is often financially impractical. This limited power becomes more complicated when buyers use shell entities like LLCs or trusts, making accountability difficult. To mitigate these risks, boards should adopt strong application policies requiring complete documentation, such as tax returns, Social Security numbers, and financial statements, before reviewing any purchase. These measures ensure transparency and help protect the building’s financial stability.

When buyers cannot provide standard documents, boards can implement protective policies, such as requiring personal guarantees from individuals with assets, occupancy agreements, and escrowed common charges. Guarantees give boards leverage by holding a named individual accountable for financial and behavioral obligations, reducing enforcement challenges against entities. All policies must be applied uniformly to avoid discrimination and should focus on financial responsibility and clarity of occupancy. Best practices include formalizing policies in writing, training managing agents, and reviewing rules with legal counsel to ensure compliance. These proactive steps safeguard the building’s finances and community standards without resorting to punitive measures.

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