As
you have no doubt noticed, A Legal Moment has been on hiatus.
This newsletter, guest written by my law partner Clifford "Kip" Marshall
is the beginning of a more regular series of newsletters. As
always, your feedback is welcome.
Right of First Refusal
A right of first refusal, also known as a preemptive right, is
different from a contract to purchase real property or an option to
purchase real property. In giving a right of first refusal, the
owner of real property promises that if he decides to sell, the holder
of the right will receive the opportunity to match the actual offer that
has been made to the owner by a third party or, alternatively, the
owner must first offer it to the holder at a fair market value before he
places it for sale. The
holder of such a right does not own an interest in the real property of
the owner but has an executory (meaning to happen in the future)
contractual right which, when triggered, may require the owner to convey
the subject real property to the holder. A right of first refusal
is valid in North Carolina upon the fulfillment of two requirements:
(1) the right must be exercised within 30 years of its creation; and (2)
the price is linked to fair market value or the price is what the
property owner is willing to accept from the third party. Many
times you will also see language regarding the time period to accept the
proffered sale pursuant to the right and whether such right continues
upon the failure of the alternative third party transaction.
Conveyance of real property
in violation of a valid right of refusal may have substantial monetary
consequences to the owner.
Rights of first refusal may be found in leases, contracts, restrictive
covenants, planned unit development declarations, or recorded in
chains of title. They can stand outside the chain of title as
well. Therefore, it is important that you make reasonable inquiry
of a prospective seller of real property as to whether he or she has
sold or given a right of first refusal to anyone and review all leases,
covenants and declarations to identify the existence of such preemptive
right.
If you discover a right of first refusal, you will want to work with
your seller on a strategy to manage it in the listing and sale
process. They discourage buyers, and there are ways to address
them early in the listing process.
Do
not hesitate to contact me to receive more information on this topic or
to suggest topics for future editions of 'A Legal Moment'. You may not
rely on this content as legal advice for any specific situation, but
should instead contact an attorney for specific advice. |
