Right of First Refusal: Basics

Short: A right of first refusal gives a specific person or institution the right to enter into a sales contract under the same terms a seller has agreed with a third party. This is especially relevant for real estate and rental apartments.

In more detail: The right arises either by law, for instance for tenants when a converted condominium is sold, or contractually between private parties.

In detail

• Statutory right for tenants: If a rental apartment is converted into condominiums for the first time during the tenancy and then sold, the tenant is entitled to a right of first refusal under certain conditions.
• Municipal right of first refusal: Municipalities can exercise a right of first refusal on certain land sales to pursue urban planning goals.
• Contractual right of first refusal: Private parties can freely agree on a right of first refusal, for example between family members with jointly owned land.
• Exercise period: The right of first refusal must be exercised within a legally or contractually set period after notification of the sale, usually two months.
• Same conditions: The holder of the right generally enters under the same price and contract terms the original buyer had agreed to.
• Land registry entry: Contractual rights of first refusal are often registered in the land registry to remain effective against later buyers too.
• Checking waiver and relevance: Before buying property, it should always be checked whether an existing right of first refusal could jeopardize one’s own purchase (eigenbedarfskuendigung, nachbarschaftsrecht-grundlagen).