Right of first refusal: what it is and why to grant it

The right of first refusal is regulated both by contract and by law. Those who enjoy the right of first refusal are at an advantage since they have no competition for the purchase of a particular property. In essence, it is a principle that offers certain persons or entities the privilege of purchasing a property before it is offered to third parties. Only by waiving the right of first refusal other parties interested in the same property can buy it.

Limited right of first refusal

The limited right of first refusal, implies that the purchase price and further conditions of sale of a particular real estate, are agreed in advance. If the real estate market situation offered the seller a more advantageous price, the purchase conditions would remain as previously agreed. It would therefore not be possible to increase the purchase price. This right of first refusal is a public deed and is entered in the land register.

Unlimited right of first refusal

A person enjoying the unlimited right of first refusal may benefit from the same purchase price proposed by another interested party for the same real estate. If the owner of a real estate property accepts a certain amount of money proposed by a person who does not enjoy the right of first refusal, the person having this right may purchase the property at the exact same price. A notary public is not required for this type of written contract.

Why grant a right of first refusal on a property?

The right of first refusal is granted, for example, to children, siblings, or other members of the same household to ensure that the property remains in the family. The right of first refusal granted to a descendant who is now 10 years old, depending on the type of contract, ensures that the property can be purchased by this child or grandchild and thus remains in the family. Even when a property is inhabited for several years by tenants, they are sometimes granted the right of first refusal on the property.

Which type of right of first refusal is more advantageous?

For buyers, a limited right of first refusal is more convenient. This way they are sure of the sales conditions that remain unchanged for the entire duration of the contract. For the seller, this type of right of first refusal is disadvantageous in the event of an increase in real estate prices. In fact, it is more convenient for property owners to grant an unlimited right of first refusal. By doing so, the owner is free to accept the most favourable price for the sale of his property.