Is It a Condo or a Co-op?

Despite the fact that the Condo Act (NY Real Prop. Law Sec. 339-v(2)(a)) expressly allows bylaw provisions governing the sale, leasing, or transfer of units, until recently boards took a hands-off policy, due to the potentially overriding prohibition against unreasonable restraints on alienation applicable to real estate. Other jurisdictions with more developed bodies of condo law, however, have recognized that such communal living requires a greater degree of restriction upon individual unit owners. Florida courts, for example, have upheld both partial (see, e.g.,Woodside Village Condominium Assn., Inc. v. Jahren, 806 So.2d 452) and total bans on leasing (see, e.g., Flagler Federal Savings & Loan Assn. of Miami v. Crestview Towers Condominium Assn, Inc., 595 So.2d 198) whether contained in the original declaration (Hidden Harbor Estates, Inc. v. Basso, 393 So.2d 637) or subsequent amendments (see Woodside Village, supra). New York courts incrementally have inched their way toward this modern view, first upholding the right of condo boards to require owners to offer a right of first refusal before renting (Bd. of Managers of Village House v. Frazier, 81 A.d.2d 760), and then expressly allowing them to impose a blanket leasing ban (Four Bros. Homes at Heartland Condominium II v. Gerbino, 262 A.D.2d 279), even to charge fines for breaking the leasing rules (Bd. of Managers of Plymouth Village Condominium v. Mahaney, 272 A.D.2d 283).

For much the same reason, flip taxes were the exclusive province of co-ops, which, as personal property, could impose restraints on transfers. Condo boards, sensing a good revenue-raising device and seizing upon changes in legal thinking, recently (with owner approval) have begun implementing transfer fees without waiting for judicial authority, instead relying on the Condo Act, which neither specifically prohibits nor allows such fees. This interpretation was bolstered by a California court in Grant v. American Golf Corp., 2003 Cal. App Unpub. LEXIS 8617, that held enforceable, as a reasonable means of revenue generation, a $5000 transfer fee imposed by a condominium board on any unit owner desiring to transfer his appurtenant club membership easement.