Is a right of first refusal in Texas legal?

Q: Can a right of first refusal be challenged?

Yes, a right of first refusal can be challenged if the terms are unclear or if there are disputes about the agreement's execution. It's important to review the specific terms and consult a legal professional if you believe your rights are being violated.

Q: What happens if I don't exercise my right of first refusal?

If you do not exercise your right of first refusal within the specified time frame, the seller can proceed with the sale to the third party. This means you would lose the opportunity to purchase the property under the terms of the existing offer.

Q: Is a right of first refusal legally binding?

Yes, a right of first refusal is legally binding as long as it is properly documented and agreed upon by both parties. However, its enforceability can depend on the specific terms outlined in the agreement.

Q: Can a right of first refusal be assigned to someone else?

In many cases, a right of first refusal can be assigned to another party, but this depends on the terms of the original agreement. It's essential to check the specific language in your contract to see if assignments are permitted.

Full question:

I have a piece of real estate which I sold and retained a right of first refusal. The property has since come up for sale and another buyer has a signed contract with the seller. Included with the contract is exhibit A which reads: If the Optionee advises of its election to exercise its option Buyer has the right under this contract to increase the amount of Buyer's offer price by delivering an ammended contract to the seller with in 24 hours following Buyer's reciept of notice of optionee's election to purchase. Each revised offer by the Buyer shall again be presented as required by the option agreement. If Optionee fails to exercise its option regarding this contract or any ammended contract, then seller and buyer may proceed with closing according to the last applicable contract. This paragraph attached as exhibit A to a signed contract seems to me to turn my right of first refusal into an auction. Is this legal?

Category: Real Property
Subcategory: Sales
Date: 04/07/2025
State: Texas

Answer:

A right of first refusal may take place in a multiple-buyer, sequential bargaining
setting. The holder of a right of first refusal has the option to purchase a subject asset on the same terms as those accepted by a third-party buyer. A variant of a right of first refusal is a right of first offer. A right of first offer requires a seller who wishes to sell a subject asset to offer the right-holder to buy that asset before it is offered to other potential buyers. If the right-holder declined the seller’s offer, the seller may sell the asset to a third party but only on terms no better (for thethird party) than those offered to the right-holder.

A seller encumbered with a right of first offer is subject to two constraints. First, a right of first offer requires that offers made subsequent to the first offer may not be lower than the first offer. Second, all offers may not be higher than the value of potential buyers’ investigation constraint.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

What is a right of first refusal in real estate?

A right of first refusal is a contractual agreement that gives a person the opportunity to purchase a property before the owner sells it to someone else. If the property owner receives an offer from a third party, the holder of the right can match that offer and buy the property on the same terms.