The right of first refusal on residential properties
- Written by WeAgentz editorial team
- Categories: Customer Advice
The right of first refusal on properties means the right to purchase or rent a property before other subjects. However, the question that arises spontaneously is: in which situations does the use of this right take precedence?
It is good to point out right away that the cases in which it is possible to use it are many. Precisely for this reason, in this article, we expose you to all the situations that affect the right of first refusal on properties.
All useful information regarding the right of first refusal
In order to provide a general overview, below you will find all the detailed information regarding the right of first refusal on properties:
- What is the right of first refusal?
- Right of first refusal for the appurtenances
- Right of first refusal to rent
- What the owner must do to guarantee the right of first refusal
- What the tenant must do to assert the right of first refusal
- The right of first refusal in residential properties
- The right of first refusal on commercial properties
- The right of first refusal on neighbouring properties
- The right of pre-emption on inherited properties
- Exceptions to the right of first refusal
Let’s proceed step by step.
What is the right of first refusal?
The law provides for the right of first refusal in order to protect the tenant in the event that the owner decides to sell the house in which he lives for rent, at the first expiry of the contract, making use of the right not to extend it.
This can happen in two cases:
- At the end of the first 4 years for free-rent contracts
- At the end of the first 3 years, for contracts with an agreed fee
Based on this, the tenant has a preferred position in the sale over other potential buyers.
In order for the right of first refusal on properties to be exercised, there may be:
- The willingness of the parties to accept the pre-emption (otherwise, the holder of the right can also refuse it, there is no obligation to purchase if he does not wish to)
- The protection of the law of this right, in the forms and conditions, established
In the event that the voluntary pre-emption pact is not respected by the person who grants it, that is, by the owner of the property for sale, he will be required to compensate the holder of the right.
In the second case, on the contrary, there is the legal pre-emption, that is, the one protected by law. It provides that if the owner of the property does not observe the right of first refusal and sells the house to a third party, the owner of the right can take action against the buyer and demand the redemption of the property. This implies that the deed of sale is not valid.
Right of first refusal for the appurtenances
There are no specific regulatory indications regarding the sale of a property together with its appurtenances (such as a garage, garage, cellar, etc. …).
Therefore, if the landlord intends to sell the housing with the annexed premises, the tenant cannot exercise the pre-emption by separating only the properties of his interest from the sale.
Right of first refusal to rent
Upon reaching the first contractual deadline, the owner may decide if necessary not to renew the tenant’s lease.
This can be linked to several reasons:
- The house is part of a severely damaged building that needs to be renovated or whose stability needs to be ensured. Therefore, in this case, the tenant’s stay is an obstacle to carrying out the renovation works
- The apartment is located in a building subject to complete renovation
- The apartment is part of a building on which the demolition and reconstruction are to be carried out, or the apartment is on the top floor of a building in which an elevation is to be carried out and to do so it is necessary to clear out.
In the event that, at the end of the works, the owner wishes to re-let the house, the tenant will have the right to be preferred, on equal terms, to other potential tenants.
What the owner must do to guarantee the right of first refusal
In order to guarantee the right of first refusal, the owner must draw up a written communication to the tenant of his intention to sell.
This communication, to be valid and clear, must necessarily contain:
- The indication of the requested price
- The indication of the conditions for stipulating the deed of sale
- The invitation to the tenant to express an intention to exercise the right or to refuse it
The entire process must take place by means of an act notified by the bailiff or also by a registered letter with acknowledgement of receipt.
If the tenant communicates in writing that he wants to renounce the purchase, at that point the owner can sell to whomever he wishes.
What the tenant must do to assert the right of first refusal
If the tenant shows interest in the purchase and wants to exercise the right of first refusal, he must notify the owner within the peremptory term of 60 days.
It is important to remember that the reply must also be notified by a bailiff or by a registered letter with acknowledgement of Receipt.
Within the following 30 days, starting from the 60 required for communication to the owner, the tenant must then pay the purchase price at the time of signing the preliminary contract or sale.
The right of first refusal in residential properties
As regards residential properties, there are two cases: renting and buying and selling.
Regarding the lease, it is necessary to know that the contracts are divided into free rent and agreed on rent. The owner can also decide to sell the property and, in this case, the law provides that the tenant can exercise the right of first refusal.
Right, that can be exercised at the first useful deadline. Therefore, the owner will not be able to put the property up for sale without first proposing to the tenant to buy the property at a price identical to what he would possibly offer to other potential buyers.
The landlord must show an intention not to renew the lease and, in addition, he must not own any other properties he owns. Subsequently, he must communicate the sale offer to the lessee by registered letter, thus enabling him to exercise his right of first refusal.
However, the owner will not be able to insert a clause in the contract imposing the waiver of the right of first refusal. The tenant has time from 30 to 60 days to decide whether to accept the proposal and not at lower conditions.
Here are the cases in which it is not possible to exercise the right of first refusal:
- When the owner intends to sell after the first contractual expiry and the contract has already been renewed at least once
- When the owner wishes to assign ownership to a company, his spouse or another relative within the second degree of kinship
- When the owner wishes to rent the property to another tenant
- When the owner is co-owner as a result of inheritance and the right of pre-emption belongs to the co-heirs
The right of first refusal on commercial properties
There is also another law that regulates the right of first refusal on commercial properties.
Even in this situation, if the owner wishes to put the place up for sale, he must notify the tenant in writing. He will have to do it through a bailiff since in this case the registered letter with acknowledgement of receipt will not be sufficient.
The tenant may exercise the right of pre-emption within 60 days from the date on which he received the communication, provided that he accepts the conditions advanced by the lessor. Consequently, the landlord will also be required to respond to the owner in the same manner.
If the owner accepts the proposal, the tenant must pay the amount due for the purchase of the house within 30 days starting from the 60th day on which he received the communication and at the time of signing the sale contract.
If the rental contract for a commercial space is in the name of more than one person, the right of first refusal can be exercised by all parties or even only by one of them if the others renounce.
In the event that the pre-emption is violated, the tenant can exercise the right of redemption or retraction within 6 months from the signing of the contract. If there is no opposition to the redemption, the tenant can pay the price of the property within 3 months from the first hearing of the lawsuit or from the date on which the buyer declares not to oppose the redemption.
The right of first refusal on neighbouring properties
The owner of a property cannot exercise the right over other properties within the same condominium building. In any case, the right of first refusal can be inserted in a private agreement signed by the owners of the neighbouring properties.
The right of first refusal for inherited properties
The right of first refusal on inherited properties is regulated by the civil code. In fact, the law provides that an heir must consult the other co-heirs to ascertain their interest in buying the property and that he must communicate the sale price to them.
The co-heirs, therefore, have the possibility to waive the right of first refusal on the property. The right of pre-emption can only be exercised if one of the co-heirs intends to sell his share. In addition, the co-heirs will have two months to communicate their intention to purchase the property at the offered price.
Exceptions to the right of first refusal
It is worth highlighting the existence of some exceptions to the tenant’s right of first refusal.
One of the exceptional cases in question could be that in which the property is owned by several subjects and is part of an inheritance community. In this case, the right of first refusal of one or more of the co-heirs prevails over that of the tenant.
In the second case, the owner intends to sell:
- To your spouse
- To his relatives within the second degree
Furthermore, the right of pre-emption cannot be exercised:
- When the property is transferred with a different deed from the real estate sale, for example with a donation
- When the sale or rental to another tenant takes place after the final expiry of the contract
- When and if the seller intends to sell the entire property of which the apartment is part of the block
Right of first refusal: when it can and cannot be used
In this article, we have shown you step by step all the various cases in which it is possible to use or not the right of first refusal.
It is good to know your rights in order to undertake a safe and informed buying and selling process. If you are a tenant and you find yourself in one of the situations listed above regarding the right of first refusal, you just have to rely on our guide.