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

A live 90-minute premium CLE webinar with interactive Q&A


Tuesday, November 17, 2020

1:00pm-2:30pm EST, 10:00am-11:30am PST

Early Registration Discount Deadline, Friday, October 23, 2020

or call 1-800-926-7926

This CLE webinar will examine and compare rights of first offer (ROFO), rights of first refusal (ROFR), and options to purchase a commercial property (collectively, the “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 address title, financing, and subordination issues to consider when granting a purchase right.

Description

Real estate lawyers use ROFOs, ROFRs, and purchase options in several contexts, including all types of commercial leases (office, retail, industrial, warehouse), ground leases, condominiums and planned developments. Purchase rights can have far-reaching impact 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.

We will discuss best practices for drafting purchase rights, including the following considerations. The agreement that includes a purchase right 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, as well as key provisions to include in each. The panel will also review title ramifications of preemptive purchase rights and their impact on future financing and sales transactions.

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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 to consider when drafting purchase price provisions?
  • How might purchase rights impact future transfers and financings of property? Is a purchase right insurable under a title policy?

Faculty

Allen, Kathryn
Kathryn E. Allen
Founder
The Law Office of Kathryn E. Allen

Ms. Allen is an attorney providing legal services covering Business Litigation and General Litigation, Oil and...  |  Read More

Martin, Kelly
Kelly L. Martin

Attorney
Troutman Pepper Hamilton Sanders

Ms. Martin is a member of the firm’s Real Estate practice. She concentrates her practice in commercial and...  |  Read More

McPhelin, Hannah
Hannah Dowd McPhelin

Partner
Troutman Pepper Hamilton Sanders

Ms. McPhelin concentrates her practice in real estate matters and other business transactions, including the...  |  Read More

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