Can my Association Be Obligated to Find a New Buyer if a Sale is Denied for Good Cause?”

Q: Our condo documents obligate the association to purchase a unit if the Board denies a purchaser. We are also obligated to find a replacement tenant for a unit owner if we deny a lease. This is becoming a real issue because we effectively cannot deny a sale or a lease and we want the ability to do so if the new owner or tenant has a criminal background or terrible credit history. Do you have any suggestions? 

A: These provisions in condo and HOA documents exist to prevent the Board of Directors from arbitrarily and unreasonably refusing sales and leases, which can effectively keep a unit owner from freely enjoying and transferring his or her property. The law tends to favor the free use and transferability of real estate, unless the condo or HOA documents have reasonable restrictions on a transfer, lease or sale. It sounds like you need to have the association’s lawyer review the documents to determine if the association can deny a sale or lease for “good cause” without the obligation to find a replacement purchaser or renter. Many documents we see allow the association to deny a new purchaser or tenant because of criminal convictions, poor credit history or a history of evictions or disruptive behavior in other communities. These restrictions are enforceable if they are reasonable and if the association is consistent in doing so. If the association does not have the authority in its documents to regulate and approve new owners and tenants, it will have limited control on this issue and the problem is compounded by the fact that the association has to find a replacement buyer or tenant who is willing to pay the same price or rental rate. This can be very difficult for the association to do, and thus I recommend that you consider a comprehensive document amendment giving the association the right to deny problematic applicants and impose fines and penalties against owners and tenants who refuse to comply with the transfer process.

 

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