Florida condominiums are often created with provisions granting a right of first refusal (ROFR) and/or a right to approve a future purchaser or occupant within the declaration of condominium. Section 718.104(5), Florida Statutes, provides that the declaration of condominium, as originally recorded or as amended, may include covenants and restrictions regarding the transfer of units “permitted by law with reference to real property.” Under Florida law, the right of first refusal is deemed reasonable if based on market price or appraised value.
A typical right of first refusal provision will provide that: (a) the Association has a right to acquire a unit upon the same terms offered by the unit owner’s contract purchaser or allow the Association to find a substitute purchaser upon the same terms (the ROFR); (b) a unit owner who enters into a contract to sell the unit must provide the fully executed contract to the Association; (c) the Association has a specified period of time to exercise the ROFR upon receipt of the contract by providing notice to the unit owner; (d) the Association, or its designee, has a specified period of time to close on the purchase of the unit; and (e) in the event the Association, or its designee, fails to comply with all of the requirement to exercise the ROFR, the unit owner is free to close on the sale of the unit to the contract purchaser. Should a dispute arise over the association’s exercise of its ROFR rights, the prospective purchaser does not have standing to bring an action against the association unless the association acted with malice.
Similarly, a condominium declaration may grant the association a right to approve a future purchaser or occupant (tenant). The declaration (or the rules and regulations promulgated by the board of directors) will provide the basis for the association to disapprove of such transfer or lease. Typically, these good cause provisions include creditworthiness, criminal history, or history of disruptive behavior in a community association by the applicant. However, the right to withhold consent cannot be for any or no reason at all unless the association has a corresponding obligation to purchase or procure a purchaser for the unit at its fair market value. Aquarian Foundation, Inc. v. Sholom House, Inc., 448 So. 2d 1166 (Fla. 3d DCA 1984). As with the ROFR, the right to approve a future purchaser or occupant typically requires the unit owner to submit the proposed contract or lease to the Association and for the Association to respond within a certain time period, failing which the transfer or lease is deemed approved.
Community associations that have ROFR or transfer approval rights should consult with counsel in the event any issues arise in implementing these provisions. In particular, prior to exercising a ROFR, association counsel should be contacted to ensure the procedural requirements are strictly followed. Purchasers of condominium units should ensure that the comprehensive rider to the FARBAR contract is properly filled out so as to disclose the ROFR or transfer approval rights of the association. Finally, the association and parties to a contract for sale of a condominium unit should review the accuracy of the condominium estoppel letter as Section 718.116(8), Florida Statutes, requires disclosure of the association’s approval rights and ROFR rights.
