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Can my association disapprove or reject a prospective buyer from purchasing a unit or lot?

By: WZ Law March 31, 2017 no comments

Can my association disapprove or reject a prospective buyer from purchasing a unit or lot?

Tyson Pulsifer, Esq., Associate Attorney

Many community association boards would like to approve owners seeking to move into the community.  Disorderly and unruly residents can not only disturb the other residents’ quiet enjoyment, but can require the association to expend significant resources to enforce its rules and regulations.  Additionally, owners that fail to repair and maintain their properties can cause assessments to increase and property values to decrease.

Our clients often ask whether the association has the authority to prevent a sale from being completed.  Though the association cannot prevent owners from selling their property, many associations have a “right of first refusal” which can be a valuable tool to help associations mitigate the above referenced risks associated with unruly owners.

A right of first refusal is the most common, but not the only, measure an association can use to prevent a sale from being completed.  A right of first refusal is “a right to elect to take specified property at the same price and on the same terms and conditions as those contained in a good faith offer by a third person if the owner manifests a willingness to accept the offer.” Steinberg v. Sachs, 837 So. 2d 503, 505 (Fla. 3d Dist. App. 2003).  Florida Courts hold that though a right of first refusal is a valid restriction on real property, a restriction requiring approval to transfer property without a corresponding right of first refusal is invalid. Aquarian Foundation, Inc. v. Sholom House, Inc., 448 So. 2d 1166, 1169 (Fla. 3d Dist. App. 1984).  Accordingly, an attempt to deny a property sale without providing another purchaser is an unreasonable restraint on alienation and therefore invalid.

Many association declarations contain a right of first refusal, though the process the association, current owners, and prospective purchasers must follow varies.  In many instances, the owner is required to provide the association the material terms to a proposed contract to sell the property.  The association may have a specified time to either approve the transfer or find another purchaser on the same terms as the proposed contract.  If there is no specified time for the association to exercise its right, the right must be “exercised within a reasonable time.” Steinberg, 837 So. 2d at 506.  In some instances, the association can find another buyer in lieu of purchasing the property.  In most cases, the association’s failure to provide an alternative purchaser or exercise its right to purchase will be deemed an approval of the application and waiver of its right.

When drafting or revising an association’s right of first refusal, it is important to balance speedy and efficient sales with the association’s interests in maintaining property values and the peaceful enjoyment of the community.  For example, exempting properties acquired by mortgagees and the association through foreclosures from complying with the right of first refusal will encourage banks to provide purchasers loans and provide the association incentives to foreclose on delinquent owners.

If your association’s declaration contains a right of first refusal, our office can evaluate whether it is necessary or prudent to revise it.  Also, if your association’s declaration does not contain a right of first refusal, this office can help the association evaluate whether adding one is in the association’s short and long-term interests.

For more information, please feel free to contact our office at 727.329.8956 during normal business hours or contact us through this website.