If you have bought a property to lease and now you want to sell it, you should be aware of the right of first refusal and how it affects the sale and purchase transaction.
What is the right of first refusal?
The right of first refusal is the right of a natural or legal person to acquire an asset, usually real estate, having priority over other persons when the thing is intended to be sold. Therefore, this right gives the holder the possibility to purchase the property for sale with priority over the rest.
The most common assumptions where this type of right is given in some of the intervening parties are:
- Forced sale of companies.
- Sale of undivided property.
Depending on the case, it is regulated in different laws and the legislation in each Autonomous Community must also be taken into account. The right of first refusal includes the right of first refusal and the right of withdrawal, which can be exercised before or after the sale.
In addition, this right may be included in an agreement, which usually occurs in limited liability companies and corporations to give preference to the partners in the event of the sale of shares or participations, in order to prevent other persons outside the company from becoming part of it. These agreements are called share transfer limitation clauses.
A preferential acquisition agreement may be established over real or personal property, always bearing in mind that if there is a lease agreement the lessees have preference over any signatory to the agreement. In addition, the preferential acquisition agreement does not oblige the owner to sell, nor the other party to buy.
Preferential acquisition requirements in urban leases
In both urban and rural leases there is a right of first refusal. In each of them there is a regulation and requirements to exercise this right, although the right of first refusal is also included in the Civil Code.
In the case of urban leases, the right of first refusal is regulated by Article 25 of the Urban Leases Law (LAU). The conditions and requirements of the right of first refusal in urban leases are as follows:
- Right of first refusal. This is the right of the tenant to acquire the property in preference to others by paying the same amount. The tenant may exercise this right on the property up to 30 calendar days after being reliably notified of the landlord’s decision to sell the property, as well as the price and other conditions of sale. The effects of the notification expire after 180 days.
- Right of withdrawal. It is exercised after the sale and entitles the tenant to purchase the property under the same conditions and at the same price as it was sold to a third party. In the event that the lessee has not been notified or any requirement has been omitted, the sale price is lower or in less beneficial conditions than the initial ones, the lessee may exercise the right of withdrawal as established in article 1518 of the Civil Code. The term to exercise this right is 30 days from the notification with delivery of the copy of the deed or similar document where the sale was formalized.
- Preference. The rights of first refusal have preference over other similar rights, except that of other owners or whoever is registered in the Land Registry at the time the lease contract is entered into.
- Integrity. Preemptive rights must be in accordance with the terms of the sale, including objects, furniture and fixtures and not only the real estate.
- Enrollment. In order to carry out the sale and register it, in the case of a rented property, the owner must justify that the tenant has been able to exercise his rights.
- Waiver. When a lease contract is signed, the waiver of the right of first refusal may be included among its clauses. If this happens and the owner wants to sell the property, he must inform the tenant in a reliable manner at least 30 days prior to the date of formalization of the sale.
- Object of the property. The right of first refusal also applies in the case of leases for uses other than housing.
The right of first refusal is the right of an individual or legal entity to purchase real estate in priority to third parties. In the case of urban leases, this includes the right of first refusal and the right of withdrawal, which take precedence over other similar rights. It is given in all leases, regardless of the object and the integrity must be complied with. In addition, it is possible to waive this right.
If you have doubts about the right of first refusal and how it affects the sale of your leased property, contact us and we will advise you on your specific case.