There are many terms that come up during a commercial real estate transaction. One common term that some people don’t fully grasp is the right of first refusal. In this article, we are going to discuss the right of prior refusal and how it can impact a commercial real estate transaction.
Right of First Refusal
A right of first refusal poses concern because that right is vested in a third party who has a right to purchase the property for the same dollar amount as the prospective purchaser has offered.
In effect, it lets the identified third-party who enjoys the right of first refusal step into the shoes of a prospective purchaser who has already made an offer on the property affected by that right of first refusal. Much like the option to purchase, if it is not recognized prior to a transaction or disposed of as part of the transaction that right-of-first-refusal remains vested in the party identified as the holder of that right and that party may exercise that right at any time thereby bumping a subsequent purchaser and/or lender out of title.
Finally, a right of prior approval of a future purchaser occupant is a right vested in a third party that gives them the right to provide an approval or denial of a prospective purchaser or occupant of the land. If a purchaser or occupant, say a lessee, takes occupation of the land affected by that right and the prior approval of the party vested with the right of prior approval has not given their approval, they are free to later on decline to prove that party who’s taking occupation and that declination will then force that party off the land.
Contact Commercial Partners
With decades of experience, Commercial Partners Title is well equipped to facilitate your next commercial transaction. We have developed a reputation for being experts in the field of commercial title insurance. That’s a distinction we take pride in and strive to provide excellent service to each and every one of our clients. Reach out to us today to discuss the full range of our title services and see how we can help with your commercial transaction. You can find us at our primary office located in downtown Minneapolis.