right of first refusal

(redirected from First Refusal Right)

Right of first refusal

The right of a person or company to purchase some thing before the offering is made to others.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Right of First Refusal

The right of a person or organization to take advantage of a transaction before it is open to other parties. For example, a seller and potential buyer of a house may agree that the buyer has right of first refusal. Then, if the seller receives a better offer from another potential buyer, she must take the offer to the first buyer and, if that buyer accepts, sell to him rather than the second buyer. One party may pay for the right of first refusal, and it may be built into a contract. See also: Earnest money.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

first refusal, right of

The right to buy or rent real property if and when the owner decides to sell or lease.The owner is under no obligation to ever sell or lease,though.Contrast this with an option, in which the the person who wants to buy or lease (optionee) has a legal right to require the owner (optionor) to sell or lease,but the optionee does not have any obligation to buy or lease.With a right of first refusal,control is in the owner.With an option,control is in the other person.

Care should be taken when drafting a right of first refusal.The parties should specify an expiration date, a price or method of calculating the price, and what happens if the purchaser-lessee declines to buy or lease at a particular point: Does the right of first refusal end, or does it continue to the next time?

The parties should give particular thought and attention to describing the triggering event.What gives rise to the ability to exercise the right of first refusal? Is it the owner merely soliciting offers, or must there be a bona fide offer from a third party before the party will be notified and given the first opportunity to buy or lease? What if the owner dies? Does the party have a right to buy the property before it passes to the heirs?

right of first refusal

The right to match a third-party's offer and purchase property if it is offered for sale. The owner has no obligation to sell to anyone, however. The term “right of first refusal” is often used interchangeably with option,but an owner who grants an option is obligated to sell if the recipient of the option chooses to exercise it. Contrast right of first offer.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
* The Trigger--The trigger for activating the first refusal right may be a term sheet, a letter of intent or an executed purchase contract.
Although it forces the prospective vendor to be disciplined when establishing the initial price and terms offered to the shareholder holding the first refusal right, in the event the offer is not accepted, the vendor is able to deal with third party purchasers unencumbered by a first refusal right.
Consortium Obtains First Refusal Rights Contract from Government of Myanmar for Rehabilitation and Improvement and 30-year Operation of Airport
M2 EQUITYBITES-October 3, 2012-Dynamic Energy Alliance Corporation awarded first refusal rights and option to purchase ten acre property near Dallas(C)2012 M2 COMMUNICATIONS http://www.m2.com
Turkish conglomerate Dogus Group, with 30.5% in Garanti Bank, which gives it first refusal rights, declined to say whether it was interested in buying GE's stake, Reuters said.
BA already owns ten per cent of Iberia and has first refusal rights over an additional 32 per cent.
Shareholders of Amena are believed to have agreed to keep their shares for three years, offering France Telecom first refusal rights if they decide to sell.
ICA Forbundet, which holds 30% of ICA, has first refusal rights under a shareholders' agreement.
The transaction is valued at USD10.8m and also includes first refusal rights under an agreement with TGP Partners, L.P.