Private rights can expose an insured to risk for the following reasons. Under an option to purchase a third party has a right to purchase the property. If this option to purchase right is not recognized or is otherwise ignored then that party does continue to enjoy a prior right that supersedes the rights of the insured owner or lender and the private party optionee can choose at any time to exercise their option so long as it is not expired. That can cause a loss of title to the insured owner or lender.
Where do These Rights Arise?
Rights of first refusal arise in many different places. They can arise in deeds, easements, covenants, conditions and restrictions. They can pop up in development agreements or in declarations. In the commercial context the most common one encountered is going to be the right of prior approval of a future purchase or occupant. This arises because in a retail setting an occupant of land affected by the right may not want to welcome their competition in right next door. So they will protect their area from encroachment of competition by obtaining that right of prior approval of a future purchaser or occupant so that they might in the future decline to approve their competitor moving into a property that is affected by that right.
Contact Commercial Partners Title Company
If you have questions about rights of first refusal as they relate to your commercial real estate transaction, don’t hesitate to reach out to Commercial Partners Title Company. We have decades of experience facilitating commercial transactions of all kinds. Our team can help answer all of your questions and make sure you are fully prepared when it comes time to close on your property. Contact us today to learn more about the full array of services we offer and see how we can help with your next commercial transaction!