With an anemic supply of available apartments, packed-to-the-gills open houses and bidding wars for well-priced units, it’s an especially tough market out there right now for New York City buyers. So imagine what it would be like if you think you've finally gone into contract, only to have a condo board swoop in and nix the deal.
It's called a "right of first refusal," and it lets condo boards buy a unit in their building even when it's promised to another buyer, provided they meet the same terms as the existing contract.
Condo boards hardly ever exercise this right--except in the case of a botched $7.8 million sale of an apartment at the Time Warner Center.
A tale of two buyers
Back in 2011, Connecticut hedge funder Donald Netter signed a contract to sell his two-bedroom duplex apartment for $7.4 million and, following standard practice, submitted the deal to the condo board.
Here’s where the plot thickens. The condo board exercised its right of first refusal, and decided to hand over the apartment to Netter’s neighbor, Jacob Wohlstadter, whose wife was on the board. (She recused herself from the decision, according to court documents.)
Wohlstadter planned to combine the two apartments, paying $7.8 million for Netter’s unit and $400,000 to the building to enclose the hallway in between. But Netter was worried that he'd be vulnerable to claims from the jilted buyer, as well as other residents of the Time Warner Center, court papers say.
The neighbors squabbled: Wohlstadter allegedly snuck into Netter's unit to plan his renovation, Netter failed to show up for the closing with the board, and the question of whether Wohlstadter actually submitted an offer or not was in dispute.
In the end, the condo board sued an LLC controlled by Netter, which owned the apartment, and won the case. (A press representative for the condo board's attorney, Belkin Burden Wenig & Goldman, alerted us to the ruling.)
In a recent ruling, the judge decided that Netter didn’t lose money on the sale and that it didn’t matter that the board gave the the apartment to an insider. And while we’re not exactly shedding tears for this financier, it is worth noting: Read the fine print.