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HOMEOWNERS ASSOCIATION’S EXERCISE OF RIGHT OF FIRST REFUSAL PROPER UNDER THE BUSINESS JUDGMENT RULE.

The Second Department determined Supreme Court properly rejected plaintiffs’ challenge of defendant homeowners association’s exercise of a right of first refusal. Plaintiffs had entered a purchase contract for a home within the association, but, pursuant the provisions of the purchase contract and the association’s declaration and restrictive covenants (Declaration), the association purchased the property. Applying the business judgment rule, the Second Department held the association had the authority to purchase the home:

In reviewing the actions of a homeowners’ association, a court should apply the business judgment rule and should limit its inquiry to whether the action was authorized and whether it was taken in good faith and in furtherance of the legitimate interests of the association … . The business judgment doctrine does not apply when a board acts outside the scope of its authority … . * * *

The contract … specifically provided that the purchaser acknowledged that the transaction was subject to the waiver, or deemed waiver, of the right of first refusal held by the Association as set forth in the Declaration. Further, the Board, on behalf of the Association, exercised the right of first refusal within the time period set forth in the Declaration. 19 Pond, Inc. v Goldens Bridge Community Assn., Inc., 2016 NY Slip Op 05979, 2nd Dept 9-14-16

REAL ESTATE (HOMEOWNERS ASSOCIATION’S EXERCISE OF RIGHT OF FIRST REFUSAL PROPER UNDER THE BUSINESS JUDGMENT RULE)/EVIDENCE (HOMEOWNERS ASSOCIATION’S EXERCISE OF RIGHT OF FIRST REFUSAL PROPER UNDER THE BUSINESS JUDGMENT RULE)/BUSINESS JUDGMENT RULE (HOMEOWNERS ASSOCIATION’S EXERCISE OF RIGHT OF FIRST REFUSAL PROPER UNDER THE BUSINESS JUDGMENT RULE)

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