Right of first refusal in the sale of real estate: Meaning, rules, and beneficiaries

The right of first refusal of the owner of an item (seller) obliges them to notify the person entitled to the right of first refusal about the intended sale of the item to a specific person and the conditions of the sale, and offer them the opportunity to purchase it under the same conditions. It can be determined based on law or contract.

The rules regarding contractual right of first refusal apply mutatis mutandis to statutory right of first refusal unless the law provides otherwise for specific cases.

Statutory right of first refusal exists under certain conditions, e.g.:

• Co-owners and condominium owners according to the provisions of the Real Property Code,
• Co-owner, farmer, tenant, other farmer, agricultural organization, Agricultural Land and Forest Fund, or the state in the order specified in the Agricultural Land Act,
• And others.

 

Exercise of the right of first refusal in the sale of real estate: Deadlines, obligations, and special cases

In general, the person entitled to the right of first refusal must inform the seller of their decision to exercise their right within 30 days of receiving the owner's notice of the intended sale in a reliable manner. Along with the statement expressing their intention to purchase, they must pay the purchase price specified in the owner's notice of the intended sale or deposit it with the court. If the owner has specified a deadline for the payment of the purchase price in the sale conditions, the person entitled to the right of first refusal can only utilize this deadline if they provide sufficient security.

Special methods and deadlines for exercising the right of first refusal are determined by specific laws: special regulations, for example, in the case of sales in insolvency proceedings, enforcement proceedings, or the sale of leased apartments.

Invalidity of sales contracts due to a breach of the right of first refusal: Procedure and consequences

Sales contracts in which the right of first refusal of the entitled person has been violated are invalid. Generally, they are voidable, but it is possible that sector-specific legislation stipulates the nullity of the sales contract as a consequence of the breach of the right of first refusal.

Invalidity is asserted by filing a lawsuit in civil proceedings with a claim for annulment or determination of the nullity of the sales contract.

Right of first refusal in the sale of real estate: Conditions, deadlines, and legal consequences

According to the general provision of the Code of Obligations, if the seller has sold an item and transferred ownership to a third party without informing the person entitled to the right of first refusal, and if the third party knew or could not remain unaware of the right of first refusal of the entitled person, that person can, within six months from the day they learned about the sales contract, request the contract to be annulled and the item to be sold to them on the same terms.

If the seller has provided incorrect information to the person entitled to the right of first refusal regarding the conditions of the sale to a third party, and if the third party knew or could not remain unaware of the correct contractual conditions, this six-month period starts from the day the entitled person learns about the correct contractual conditions.

In any case, the entitlement ceases after five years from the transfer of ownership of the item to a third party.

The duration of the right of first refusal can also be limited. The Code of Obligations provides the general rule that a contractual right of first refusal ceases after the expiration of the time period determined by the contract. If the duration is not specified, the right of first refusal expires after five years from the conclusion of the contract. The duration of the statutory right of first refusal is not limited.

As it is necessary to be cautious and consider any potential right of first refusal in the sale or purchase of real estate, violation of which may result in the invalidity of the contract (voidability or even nullity), I suggest that you consult with an attorney to determine whether there is a right of first refusal on the property you intend to sell or purchase, and to draft the sales contract accordingly.