Rights of First Refusal, Rights of First Offer, Options to Purchase: Key Provisions for Clarity and Enforceability

Recording of a 90-minute CLE webinar with Q&A


Conducted on Thursday, May 31, 2018

Recorded event now available

or call 1-800-926-7926
Program Materials

This CLE webinar will examine and compare rights of first offer (ROFO), rights of first refusal (ROFR), and options to purchase commercial property (collectively, purchase rights). The panel will discuss key drafting points and issues of interpretation which can arise due to a lack of clarity or unforeseen circumstances. The panel will also discuss title, financing and subordination issues which must be considered when granting a purchase right.

Description

Real estate lawyers use ROFOs, ROFRs and purchase options in some contexts, including office and retail leases, ground leases, condominiums, planned developments, franchise agreements, and joint ventures. Purchase rights can have far-reaching effects on the grantor, holder and subject property but are often an afterthought in the underlying transaction. They must be drafted with care, taking into account potential changes in parties and circumstances which may occur years later.

The agreement should state the conditions for exercising the right to purchase and include a “time is of the essence” clause. All notices and other documentation must be in writing and the parties should be identifiable. The parties should specify whether the preemptive right is a one-time right or a continuing right, whether the agreement requires strict compliance in exercising the right, and whether it is assignable.

The grantor should consider the burden on the title to the property. The grantor may have difficulty financing, selling or leasing the property as a result of the purchase right. Lenders typically require subordination of an existing right before making a mortgage loan. Purchase rights should contain precise subordination language that addresses financing and foreclosure contingencies so that no further subordination is required.

Listen as our authoritative panel discusses the nuances of ROFOs, ROFRs and purchase options, and key provisions that should be included in each. The panel will also review title ramifications of preemptive purchase rights and their impact on future financing and sales transactions.

READ MORE

Outline

  1. Distinguishing between different types of purchase rights
    1. Right of first refusal
    2. Right of first offer
    3. Option to purchase
  2. Key provisions
    1. Triggers, notice, other requirements to exercise purchase right
    2. Time of the essence, strict compliance
    3. Valuation
    4. Identification of parties—assignment provisions
  3. Common points of misunderstanding and dispute

Benefits

The panel will review these and other critical issues:

  • What distinguishes a ROFR from a ROFO or an option to purchase?
  • Why might “time of the essence” and strict compliance provisions be particularly relevant when drafting purchase rights provisions?
  • What are some of the pitfalls in drafting ROFRs, ROFOs and purchase options?
  • What are the factors when drafting purchase price provisions?
  • How might purchase rights affect future transfers and financings of property? Is a purchase right insurable under a title policy?

Faculty

Allen, Kathryn
Kathryn E. Allen
The Law Office of Kathryn E. Allen
Simoneaux-Cuaso, Maggie
Maggie R. Simoneaux-Cuaso

Atty
Silberman Law Firm

Ms. Simoneaux-Cuaso works in the firm’s Austin office and focuses her practice on real estate, probate, and...  |  Read More

Siesta, Victoria
Victoria J. Siesta

Atty
Ballard Spahr

Ms. Siesta focuses her practice on real estate finance transactions, working directly with commercial banks,...  |  Read More

Other Formats
— Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. All formats include program handouts. To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

$297

Download

$297