Right of first refusal for real estate

Always Entry into an Existing Purchase Agreement

A purchase contract with a third party must always be concluded first. The preemptive right holder can then enter this purchase contract under the same conditions. The original buyer is then at a disadvantage.

This ensures that a seller, for example, does not set an inflated, non-serious price to deter preemptive right holders.

Expiration of the Right of First Refusal

A right of first refusal can expire if the entitled person dies, waives the right, or does not meet the deadline for exercising it.

In the case of an existing right of first refusal of the municipality, the notary transmits the details of the purchase contract to the municipality, which then has three months to exercise its right of first refusal. However, it usually waives this right, confirming it with a waiver declaration or a “negative certificate.”

Municipality’s Right of First Refusal is the Most Common

A right of first refusal can be based on a civil contract between two parties or be legally mandated.

The municipality’s right of first refusal is the one most commonly encountered by real estate sellers and buyers. However, municipalities usually do not exercise this right.

Types of Rights of First Refusal

The types of rights of first refusal can be categorized into civil and statutory rights of first refusal.

• Contractual, with Notary, but without Land Register Entry (Obligatory Right of First Refusal): A notarized contract between the owner and the person entitled to the right of first refusal.
• Contractual, with Land Register Entry (Real Right of First Refusal): Entered into Section 2 of the land register, meaning it does not only apply between two persons but burdens the property itself.
• Statutory, General (Statutory Right of First Refusal):
  • The tenant’s right of first refusal under §585 BGB applies when the tenancy already existed and the apartment is being sold for the first time as an individual condominium (instead of the house as a whole), and the buyers are neither family nor household members.
  • The heirs’ right of first refusal applies against non-heirs and is intended to prevent outsiders from entering the community of heirs against their will.
• Statutory, Individual (Public Law Right of First Refusal): This right often belongs to municipalities, is rarely exercised, and is based on various legal foundations, including monument protection, nature and landscape conservation, flood protection, land use plans, or specific municipal regulations. The municipality must provide reasons for exercising the right of first refusal, and it must serve the public good. A sale among family members overrides the municipality’s right of first refusal. A notable difference from other rights of first refusal is that the municipality does not have to pay the agreed purchase price but only the market value. In this case, the seller may withdraw from the purchase agreement.

Ignoring an Obligatory Right of First Refusal is Technically Possible

If the seller conceals the concluded purchase contract from the preemptive right holder secured only by a notary but without a land register entry, and the entitled person is unaware of it, allowing the deadline to pass, the purchase contract with the (non-entitled) third party remains valid.

The overlooked preemptive right holder would then only have the option of claiming damages through legal action.

For this reason, obligatory rights of first refusal that do not require land register entry are often additionally secured by a real right of first refusal through an entry in the land register.