example. An older landowner prefers his land to be acquired by the conservation organization after his death, without penalizing the value of his estate. It could grant the organization a purchase option to acquire the property at its value determined by the control of the estate tax, but assumes that the value assessed for these purposes could be on the lower page of comparable securities. Instead, it proposes a prerogative of first refusal, triggered when the property is about to sell to a third party that will likely be a residential developer. The discussion in Winberg focused on whether or not the owner granted a first right of sale. A conservation organization needs time to analyze the real estate offer from the third-party buyer to the owner and, if the information is satisfactory, obtain the necessary internal authorization. The organization will probably need time to get funding. However, as explained below, the owner who grants a prerogative of first refusal is likely to want to ensure that the time given to the organization to respond is short. Combining a reference right with the right to first offer and negotiation can alleviate this serious time constraint. Clarification of terms Although the language used in its definition is similar, a purchase option, an initial offer and a right of pre-emption are very different legal concepts.
A right of first negotiation is not a stand-alone right, but an addition to the right to the first offer. The objective is to create time after the rejection of an initial offer so that counter-proposals can be made and, if possible, that the owner can agree with the owners before others can make competing offers. At Stuart, the parties entered into a commercial lease with a clause granting a “first right of refusal on the ground” and, when exercising that right, identified a purchase price of $160,000. If you need to establish a right to the first offer agreement, here are some common pitfalls that you should avoid if possible. Unlike call options, the rights of the first offer and the rights of the first refusal can also be used to obtain rent extensions or other rights that are not related to the sale of real estate. When the agreement is written, there must be answers to some of the most common questions to ensure that the right to the first offer can be exercised. Here are a few questions that you need to ensure that the treaty answers: let`s take a close look at what the first right of rejection means.