Association's Right of First Refusal Prohibited by Condominium Act
The New Jersey Condominium Act (the "Act") at N.J.S.A. 46:8B-38 specifically prohibits a condominium association or its developer from reserving or retaining a right of first refusal to purchase a condominium unit upon resale, gift, or devise, by the unit owner. This provision of the Act adopted in 1980 effectively supplemented and amended the prior section of the Act, N.J.S.A. 46:8B-36, which provided for a rebuttable presumption of unconscionability with respect to master deeds or by-laws which had provided for a right of first refusal on behalf of the condominium or its developer.
It is unlikely that you will find a public offering statement or master deed drafted for a recently developed condominium which includes a provision allowing for a right of first refusal on behalf of either the condominium or its developer. However, rights of first refusal have been found in older governing documents, specifically those drafted in the late 1990s and which pertain to condominiums funded with HUD monies or other urban renewal funds.
A condominium's board of trustees should be aware that such provisions providing for a right of first refusal are prohibited by the Act and should therefore advise its management to keep a look-out for instances where a developer may attempt to enforce such a right of first refusal.
