In order for a new buyer to purchase a condo and enter into the community, they must first be vetted by the Board or a committee approved by the Board. The condo Board gets what’s called the “right of first refusal.” But does this mean a condo Board can reject anyone without a fair or justified reason?
Most definitely not.
The Board cannot make any rejection without its presence being noted in the bylaws. The bylaws must clearly state any legitimate reason to reject buyers. And just because it is in the bylaws doesn’t necessarily make it legitimate. It is vital that the bylaws are checked by a community law attorney to make sure that they are legally sound.
The danger in rejecting a potential condo owner without fair or reasonable cause is that the association could face a discrimination lawsuit. For this reason, the Board or committee must have proper written documentation explaining their choice in rejecting a candidate. It should be obvious, but if the board rejects anyone based on race, religion, sexual identity, etc. they could face serious charges and repercussions by violating the Fair Housing Act.
For all of these reasons and more it is important to create a fair and consistent screening process. This process could involve a series of equitable questions that are the same for every potential candidate.
It is sometimes suggested that there are 3 main reasons to reject a buyer. The first is a violation of governing documents. For instance, if a buyer plans on having more members in the unit than is allowed in the CC&Rs. The second reason for denial is prior rules violation in a previous community. The third is for misrepresentation or perjury. If someone lies in their application, this could be grounds for rejection.
If your community needs your bylaws checked or is in need of bylaw amendments that will protect your association from potential candidates that may not be the best fit, contact Dania Fernandez and Associates today. We can set you up with legal advice and make sure you and community stay protected.