Navigating Right of First Refusals
New York partners Sonia Bain and Daniel Anziska had their article “ Negotiating and Exercising Rights of First Refusal” published in the August 13 edition of the New York Law Journal.
Bain and Anziska started their article by stating “that including a Right of First Refusal (ROFR) provision in a lease or other real estate contract is significant since a holder of such ROFR has essentially locked in a future right to exercise an option to purchase the property and, thus, protect its investment in the real estate, including all physical improvements and any goodwill developed relating to the site.” They continued their article by offering advice – in subsections titled Understand the Offer, Exercising the ROFR, and Post-Exercise of ROFR - on what said holder of ROFR should know and understand in order to protect their property interests.
Additionally, they contend that ROFR holders’ attorneys can also “provide significant value when an offer is tendered to the holder” by evaluating “the offer and ensur[ing] that [it] is properly exercised.” They also state that an ROFR holder and its counsel “need to keep in mind the threat of litigation with the seller or any third party, particularly if material changes are made to the offer.”
“When negotiating an ROFR provision in a lease or other real estate contract, a practitioner needs to help guide its client to think about the future and help it protect its investment in the property,” the duo stated in conclusion. “If the holder and its attorneys do not consider the issues related to effectively exercising an ROFR and account for the risks of potential litigation claims if not exercised within any limitations imposed, then the holder may be faced with a costly path that could ultimately cost the client the right to acquire the property.”
“However, a well-thought-out ROFR provision, along with proper guidance on limiting the risks of litigation, will help a practitioner shape its client’s future,” they added.
New York associates Kevin Wallace and Clara Mak assisted in the preparation of this article.