A former resident of the Time Warner Center lost his court battle to sell his unit at the Related Cos. luxury property to a buyer of his choice, with an appellate court ruling that the condo board properly exercised its right of first refusal by demanding that he sell the unit to a building resident instead.
Thursday’s decision affirms that condo boards are free to block the sale of a unit in favor of a buyer of their choice, even if that person is privy to information that puts them at an advantage, as long as they match the accepted offer.
Hedge funder Donald Netter, the owner of the unit in question, recognized the condo board’s contractual right of first refusal, but objected to the fact that the beneficiary would be a private individual who wanted to purchase the unit to combine it with his own.
Netter argued that a condo board can only refuse a sale if the collective board intends to purchase a unit.
What irked Netter further was the fact that the board’s chosen buyer, Jacob Wohlstadter, is married to a condo board member. Though the board member recused herself from the proceedings on this particular issue, Netter argued that favoritism and self-dealing were in evidence.
The New York State Supreme Court rejected these arguments in a decision last February, and Netter lost his appeal of the decision on Thursday.
“Even if, arguendo, plaintiff engaged in some favoritism by designating [Wohlstadter], defendant failed to show prejudice therefrom,” the Appellate Division First Department wrote, pointing out that Netter would receive the same amount of money for the sale in either scenario.
The panel found that the condo bylaws allow the board to exercise its right of first refusal through a designee, which does not have to be organized or owned by them.
Additionally, Wohlstadter’s agreement to lease the hallway space between his unit and Netter’s unit for $400,000 gave the condo board a legitimate reason to prefer his offer, according to the appellate panel.
“My client is quite pleased by the court’s decision,” said Stephen Younger of Patterson Belknap Webb & Tyler, who represented the condo board. “We are glad that justice will finally be done.”
Netter’s counsel was not immediately available to comment.
A New York Times investigation published in February about foreign buyers of Manhattan real estate focused on the Time Warner Center as an enclave of LLC-shielded foreign buying activity. The Real Deal interviewed real estate attorneys about their response to the series.
Both Wohlstadter and Netter operated under LLCs.