I don't know how often it comes up, but it is sometimes possible to obtain a Right of First Refusal to a property. That is, if the owner sells it, you have the right to buy it under the same terms negotiated by a prospective buyer.

There was a recent case in Amarillo regarding a fireworks stand owner with a lease on a property and a Right of First Refusal to buy the property if it sells. The owner then sold the property to a group (I guess that's the right term) without notifying them that the fireworks stand owner had a Right of First Refusal. In fact, the owner let the buyer assume that the fireworks stand belonged to the owner, not a third party. When they then conveyed the property to the members of the group who then sold the property to another company, the owner of the fireworks stand then tried to enforce the Right of First Refusal.

From the article linked below, if the buyer has no notice that someone had a Right of First Refusal on the property, then the holder of that right has no action to take against the buyer of the property.

From https://agrilife.org/texasaglaw/2022/06/27/rights-of-first-refusal-and-the-importance-of-record-notice/

Quote:

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HD Defendants argue that they are protected by the "bona fide purchaser defense." This defense provides that a third-party interest in property is binding on a subsequent purchaser for value if it was duly recorded or the purchaser had notice of the interest. An unrecorded conveyance of an interest in land is void as to a subsequent purchaser who buys the property for valuable consideration and without notice. Notice may be record notice, actual notice, or constructive notice. A party's bona-fide-purchaser status may be transferred, meaning a purchaser from a bona fide purchaser takes good title even if that subsequent purchaser had knowledge of the third party's interest at the time of its purchase.

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The most important lesson from this case is to ensure any interest in land is properly recorded in the deed records immediately. This is certainly true for rights of first refusal, but can also be important for other rights such as leases or easements. The only way to ensure notice to any and all third parties is to have these rights recorded in the deed records of the land. Here, had Mr. W recorded its Memorandum of Lease prior to the HD Exchange purchase, HD Exchange would not have been deemed a bona fide purchaser of the land.

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(On a side note, original owners were a Mr and Mrs Ivy, but they are collectively referred to as the Iveys! I never would have guessed that.)

Anyway, I've heard of the Right of First Refusal from time to time, but I never actually ran across it in use. I've been told that it can reduce the value of the land a bit because some prospective buyers might not want to go to the bother of negotiating a deal and then someone else taking the deal they negotiated away from them.

Heard of it in my line of work, never actually seen it (Right of Way-Acquisitions etc) Covered it when I got my Real Estate License, haven't seen/heard of it since.


My guess is that unless it was filed in the courthouse, it's probably not going to hold as much water as the fireworks stand guy hopes. Especially now that there is a 3rd party involved. Could be that the original landowner "forgot", or he may have had a better offer and just went with it.

It may also be that the original landowner had zero concept of a Right Of First Refusal or what it meant or any of that. Sort of like when a landowner leases their place, then lets the son in law hunt the leasee's stands/feeders because its "his place & he can do what he wants to" sort of thing.

IF you ever do a document like this, have it notarized and file it in the court house. Make sure everyone has copies & that its entered onto the chain of title for the property you are interested in.

The onus was really on Mr. W to get that Memorandum of Lease filed as soon as possible (the day it's executed is the best). Their delay caused their own problems.

This case demonstrates the importance of getting your documents filed in the courthouse pronto.

It's been 20 years, but I worked with companies that had the right of first refusal on major customers if they decided to sell. I believe that we paid $1000 for the right of first refusal.

Don't just get copies. Get certified, recorded copies from the County Clerk. That way you have 1) proof that the version that got recorded was correct and 2) copies that can be used for additional official uses.

For a right to be enforceable it should be recorded on the title in the deed records. Right of first refusal is absolutely an enforceable right that will be found by any title policy if it is in the records. As far as devaluing property, that is like any number of things that people have convinced themselves of devaluing property. While there may be plenty of people that don't want to mess with it, there is still easily a critical mass of a market that will negotiate a price that is competitive with anything else in the area.

I had a similar case representing Mr W Fireworks in Robertson County, with some different facts but difficult issues. We were successfull in enforcing the right of first refusal.

They are common in some leases if the tenant is invested in that location or significant improvements.

Billboard companies often have them in their leases.

I mentioned the case to my younger brother and from what he told me, It turns out that there was some property near me that had a Right of First Refusal that turned into a bit of a nightmare.

The seller had sold the farmland to a farmer who didn't want the farmhouse, but the farmer objected to the family buying the farmhouse (long time friends of the seller) for his own personal reasons and so wanted to buy the house just to deprive the family who wanted to buy the farmhouse from buying it.

Even worse, it wasn't even because of that family -- easily among the least offensive people I have ever met -- but because he had issues with the husband's brother.

Eventually, after much maneuvering, the family did end up buying the house. I hate to think of how much extra it cost them, though, because of the buyer of the farmland.

I've included right of first refusal in commercial contracts and investment property deals. Never needed to use it. However, it was included in my child custody docs relating to visitation.

If you ever grant or obtain a ROFR, make sure you have an attorney draft it for you. Among many potential issues, two big ones are: 1) Notice has to be clearly defined and specified; and 2) There has to be some termination event that can be easily determined. A lot of intra-family ROFR's will provide for the lives of a group of people. Sometimes you have to determine how many grandkids Granny had and if they are all still alive.

Yes, they can be a hindrance to marketability.