Restrictions on selling property - Posted by john

Posted by Frank Chin on April 19, 2004 at 05:44:01:

Carl:

As you mentioned, that’ll depend on the bylaws as established. As an LO requires a lease, that’ll probably fall under some restrictions for “renting”.

In fact, it makes more sense to have restrictions on rentals because once the NOO percentage goes over 50% for a condo complex, it will be difficult to obtain conventional financing.

Sounds like the developer is trying to avoid quick flippers coming in, and also have some control over the mix of the original residents that may determine the success of the project. Usually, that means resdients that buy and stay for a while rather than a quick flipper.

Frank Chin

Restrictions on selling property - Posted by john

Posted by john on April 17, 2004 at 16:49:17:

I have an opportunity to purchase a condo in a new building that is due to open soon. The catch is that the contract contains a stipulation that states you cannot sell your unit for 1 year from the time escrow closes on your particular unit, otherwise all equity goes to the company that owns the building.

Is it legal for them to place this type of restriction on what you can do with your property once you close escrow? Would this hold up in court if you were to challenge it after signing the contract?

Re: Restrictions on selling property - Posted by Frank Chin

Posted by Frank Chin on April 18, 2004 at 08:25:19:

John:

Not a lawyer, but I lived in a condo, and owned a few as rentals.

All condo’s, and coops as well, have CC&R’s where you have to abide by. The restrictions are put in place for the good of ALL the condo owners, usually to maintain the value of the condos, prevent speculation, improve living conditions, and preserve stability.

In the case of a new builidng, the develop sets the bylaws. In fact, I bought a unit at a newly renovated building from the sponsor/developer, (building was formerly a high school) who is the one that develops the bylaws prior to the sale of the first unit. When a certain number of units are sold, power is handed over to an elected HOA, which can then modify the bylaws. But this might not help you if the restrictions themselves are written into the deed.

But the HOA cannot impose its will on the sponsor, and he can still set his own rules for sale of the original sponsor units.

The complex where I got the condos impose restrictions on rentals. I looked into investing in condos and coops thru the years, and most lawyers tell me the CC&R’s are pretty ironclad, and if you cannot abide by them, don’t buy into it.

Coops in NYC has a “flip tax” where which makes it unprofitable to buy a unit, and sell within a year and make a profit. The purpose is to prevent speculation where an investor buys the unit, and quickly flips it.

I understand there’s been challenges to these rules, at least in NY, mostly unsucessful. The only grounds appear to be where one proves discrimation.

I finally understood the value of the restrictions. While the value of the condos at our complex varied from 50K to 100K, a investor friendly complex not far away which had little restrictions at the beginning had units selling for 8K with no takers.

Frank Chin

Re: Restrictions on selling property - Posted by Carl CA

Posted by Carl CA on April 18, 2004 at 12:19:35:

Frank,

Do you think John could L/O his condo with the excercise date past the one year restriction? This may not constitute a sale under the CC&R’s but achieve his goal. Although it may constitute a sale, depending on how the CC&R’s are written. Depends how savy the HOA is, I suppose.

Carl

Re: Restrictions on selling property - Posted by Heather Morrison

Posted by Heather Morrison on January 15, 2007 at 01:34:09:

Hi,

say in the instance that three people bought a condo together and all of a sudden two people want to sell it…does that mean the third person is obligated to sell it as well?

Im really confused here and could use any advise put forth…I want to sell it but one of the owners is being difficult, I need to know the legal side of it,

Thanks,

Heather