The right of first refusal is a prerogative that allows certain persons to have priority in the purchase of a property or other asset over other potential buyers. It is a legal institution that aims to protect specific interests and rights, guaranteeing the right holder the possibility of acquiring the asset under the same conditions offered to third parties. This mechanism, especially prevalent in real estate, can have significant implications on the dynamics of a purchase and sale, making it essential to understand how it works and the consequences for all parties involved.
What is the right of first refusal?
The right of pre-emption can be defined as the possibility, granted by law or by agreement between the parties, to be preferred in the purchase of a property. It is distinguished into legal pre-emption, provided for by law in specific situations, such as in the case of leased property or inheritance, and voluntary pre-emption, resulting from a written agreement between the parties involved. Legal pre-emption is intended to protect public interests or particular categories of persons, such as tenants or co-heirs, while voluntary pre-emption is based on private agreements reflecting personal or commercial needs.
How does the right of first refusal in real estate work?
The operation of the right of first refusal follows a precise procedure. When the owner of a property wishes to sell it, he must formally notify the holder of the right of first refusal of his intention to dispose of the property, indicating the price and the terms of the sale. The holder then has a period of time set by law or agreement (often 60 days) to decide whether to exercise its right. If he does not do so within the time limit, the owner is free to sell the asset to a third party, but only under the same conditions communicated. It is important to note that failure to do so may invalidate the sale or lead to legal disputes.
Impacts on buying and selling real estate
The right of first refusal can influence purchase and sale in several ways. On the one hand, it offers greater protection to the holder of the right, guaranteeing him a privileged opportunity to purchase. On the other hand, it can be a complicating element for sellers, who have to follow precise procedural steps and meet strict deadlines. Moreover, for third-party buyers, the presence of a right of first refusal may create uncertainties, especially in terms of timing and the possibility of concluding the transaction. For this reason, it is essential to always check the existence of any pre-emption rights before entering into real estate negotiations.
Differences between legal and voluntary pre-emption
The main differences between legal and voluntary pre-emption concern their origin and the situations in which they apply. Legal pre-emption is established by law and applies in specific cases, such as the sale of rented real estate, where the tenant has priority in the purchase, or the sale of inherited shares, where the co-heirs have the right of pre-emption to maintain the integrity of the family estate. Voluntary pre-emption, on the other hand, stems from a private agreement between the parties, often included in preliminary contracts or shareholders’ agreements. This type of pre-emption is more flexible, as the terms and conditions can be tailored to the needs of the parties involved.
When and why the right of first refusal can be advantageous
The right of first refusal is an advantage for the owner, as it allows him or her to acquire a property of interest on the same terms offered to third parties, without having to compete with other buyers. This is particularly relevant for tenants who wish to purchase the house they live in, avoiding the stress and additional costs of a property search. At the same time, the right of first refusal can also be useful for the seller, as it offers the possibility of maintaining harmonious relations with the holder of the right, such as tenants or family members, and concluding the sale more quickly and smoothly.
How to prepare for a sale with pre-emption
In order to deal with a sale where there is a right of first refusal, proper preparation is essential. Sellers should gather all necessary documentation and strictly comply with notification procedures and deadlines. Third-party buyers, on the other hand, should inquire about the presence of any pre-emption rights before engaging in negotiations, to avoid surprises during the process. In any case, relying on an experienced real estate agency, such as Ideas & Real Estate, can make the difference, ensuring a professional and transparent handling of the entire transaction.