Right of first sale, option to buy and right of first refusal to buy

Just a few terms that are enormously similar: option to buy, right of first refusal and right of first refusal. But while those terms may seem similar, the legal effect is totally different. And that is exactly where it often goes wrong.

Rights to buy real estate

You often see them in purchase agreements, leases or deeds of delivery: the right of one party to buy (part of) an immovable property from the other party. For example, the right of the tenant to buy the leased property when the landlord wants to sell it. Or the right of a buyer to buy an additional piece of land, if his neighbor (who is also the seller) wants to sell the rest of his plot. Sometimes such a right is designed as a right of first refusal to buy (also called right of first sale) and sometimes as an option to buy. Which variant is chosen makes quite a difference to the content of the prospective buyer's right.

Purchase option

With an option to buy, the buyer only has to decide whether he wants to proceed to purchase. If he does so and if the conditions are met, an option to purchase is immediately established. The will of the seller is no longer required: This is recorded in the purchase option itself. The purchase option is then regarded as the offer, and invoking the purchase option constitutes acceptance: a contract of sale is then concluded.

Right of first refusal to buy

With a right of first refusal to buy, things are a little different. The right of first refusal only takes effect when the seller decides to put the property up for sale. In that case, he is obliged to first offer the property for sale to the person who has the right of first sale. The provisions establishing the right of first refusal then state how the price is established and what further conditions apply to the right of sale.

Formulation is essential, not so much the name

As to which variant you are dealing with, not only the heading of the provision is important. In fact, what matters most is the content and wording of the terms themselves. Therefore, get proper advice before agreeing on an option to buy or right of first refusal. Or when there is disagreement about invoking it. The real estate law attorney of Lexys Lawyers can tell you more about that.