Right of First Refusal: Can Sellers Cancel Contracts?


A condo seller secured a sales contract, but the condo association has Right of First Refusal and opted to buy the condo under the contract’s terms. If the seller doesn’t want to sell to the association, can they cancel the contract altogether?

WEST PALM BEACH, Fla. – Question: Last June, I had intended to sell my condominium unit to a third party who extended a generous offer in cash. The sale was blocked by the association, who invoked their right of first refusal. As soon as I found out that I was supposed to offer my unit to the association, I decided that I no longer wanted to sell my unit.

The association sued me claiming I have violated their right of first refusal when they extended an offer to me containing the same terms and conditions as the outside offer, and they have asked a judge to force me to sell the unit to them.

I clearly denied their offer since I had no interest in selling my unit to the association – I was only interested in selling it to the third party.

Can the court force me to sell my unit to the association? – C.C.

Dear C.C. – Under relevant Florida case law, a community association cannot have a right to approve or deny the sale of a unit or lot without a right (or obligation, really) to purchase the unit at the same terms as the offer presented for approval. That is, the association must have a duty if it rejects the transaction to complete the sale on its own behalf (or sometimes the association can substitute a third party as an approved purchaser).

It’s not entirely clear why you don’t want to sell to the association. You entered a deal to sell your unit for a generous amount of cash, and the association has agreed to make you whole by completing the deal.

The fact that you are balking at that deal makes me wonder if you were selling the unit to a friend, or if instead there were some additional terms of the deal that are not being fulfilled by the association. In any event, whether they can enforce the clause in their declaration will really depend on the exact language of the right of first refusal itself and whether all of the procedures were completed properly.

There may be some technical issues related to how they enforced the right of first refusal, and perhaps an attorney representing you can find a loophole that gets you out of the deal. And if, for example, the declaration says that the association must purchase the unit at the same terms as the contract, perhaps there’s language in the contract itself that provides a loophole (for example, if the contract gives you the unilateral right to walk away from the deal at any time).

But specific performance (forcing you to sell) is a remedy that may be available, and so I do think there’s a real risk that you could be forced to sell your home.

Again, logically speaking, this should not be a bad thing as you wanted to sell your unit, and you will, in fact, be selling it for the exact amount – the ultimate buyer should be irrelevant to you. Still, I can appreciate that there are sometimes unrelated factors that may affect your desire to sell your home to the condominium itself, and so I think your best bet is to hire an attorney experienced in these issues to see if there’s a way to defend against the sale.

The longer you fight the inevitable, the higher your legal fees will be (and you may be responsible for the association’s fees as well); and that is going to cut into the generous amount you will receive for the unit.

Question: Under the condominium law, who can sign checks? – D.W.

Dear D.W. – The various community association statutes do not provide any guidance about who can sign association checks, and ultimately this is a practical question for the board.

I always advise that it is best to have two signers on every check, because it helps prevent fraud. Traditionally, the signers would be the president and treasurer, or perhaps the president and secretary; but it can be whatever combination works best for the board, depending upon who is regularly available.

Some community associations allow their property manager or the management company to sign checks on their behalf. I am not usually a fan of such an arrangement because it makes it much easier for a rogue employee to steal money from the association, and it may not come to light until a significant amount has been stolen.

I am not in any way suggesting that property managers are inherently untrustworthy (the vast majority are entirely trustworthy, just like people generally) – but when the board is directly involved (and particularly when two board members must sign any check), it adds a check and balance that will make fraudulent acts much more difficult. In fact, some management companies may even require that at least two board members sign every check. Also, your bank may have its own check signing requirements.

© Copyright 2022 The Palm Beach Post. Ryan Poliakoff, a partner at Backer Aboud Poliakoff & Foelster, LLP, is a Board Certified specialist in condominium and planned development law. This column is dedicated to the memory of Gary Poliakoff.

©Florida Realtors®

Source link