What Is the Right of First Refusal on a Property? 

What Is the Right of First Refusal on a Property? 

When buying or selling a property, most assume the freedom to negotiate and choose buyers or sellers is absolute. However, in some cases, this freedom is limited by a right of first refusal—a legal or contractual right granting a specific person the priority to purchase the property before others.

This right does not compel the owner to sell but requires them, once they decide to sell and have agreed to terms with a third party, to first offer the property to the holder of this right under identical conditions.

Understanding the Right of First Refusal 

The right of first refusal means the pre-emptor gets to be the preferred buyer. When the property owner finds a third-party buyer and agrees on terms, they must inform the pre-emptor of the offer. The pre-emptor then has the option—but not the obligation—to buy the property on the same terms.

For example, if Marco grants Giulia the right of first refusal on his apartment and then receives an offer from Paolo for €200,000, Marco must notify Giulia before completing the sale. Giulia then has a set period to decide whether to purchase the apartment for that price. If she declines or does not respond, Marco is free to sell to Paolo.

This right does not limit the owner’s choice to sell or the price but applies only once a sale agreement with a third party exists, effectively “freezing” the deal to give the pre-emptor the chance to match it.

What Happens if the Right of First Refusal Is Ignored? 

The consequences depend on whether the right arises from a private agreement (voluntary pre-emption) or by law (legal pre-emption).

If the right is contractual, binding only the parties involved, selling without notifying the pre-emptor does not invalidate the sale. The buyer obtains full ownership, but the pre-emptor can sue the seller for damages caused by ignoring the agreement. The pre-emptor cannot reclaim the property from the new owner. For instance, if Marco sells to Paolo without telling Giulia, Paolo’s purchase is valid, and Giulia’s only remedy is to seek compensation from Marco.

The violation can also occur at the preliminary contract stage. If the owner signs a preliminary sale agreement with a third party without informing the pre-emptor, the preliminary contract remains valid, but the pre-emptor can claim damages. Moreover, if the third party knowingly participates in breaching the right—either maliciously or negligently—they can also be held liable.

Legal vs. Voluntary Right of First Refusal 

Unlike voluntary rights of first refusal arising from private agreements, legal pre-emption rights are imposed by law and attached directly to the property. These rights are enforceable against third parties and include the powerful right of redemption—the pre-emptor can reclaim the property by reimbursing the buyer.

For example, if Luca holds a legal right of first refusal on Marco’s house but Marco sells it to Sara without offering Luca the option, Luca can demand to redeem the property by reimbursing Sara.

Common Legal Pre-emption Cases 

The law provides pre-emption rights in various contexts, balancing private and public interests:

• Among co-heirs: Co-heirs must be given the chance to buy a share of inheritance before it is sold outside the family.
• Cultural heritage assets: The State or public bodies may pre-empt purchases to preserve cultural properties.
• Agricultural land: Tenant farmers or neighboring landowners often have rights to buy first, encouraging land consolidation and agricultural continuity.
• Commercial tenants: Tenants of shops or businesses may pre-empt sales to protect their business goodwill.
• Residential tenants: Under strict conditions, tenants may have rights of first refusal.
• Family businesses: Relatives working in a business have rights to maintain continuity during sales or inheritance.

Right of First Refusal for Cultural Heritage Properties 

Properties declared cultural assets fall under strict rules. When such a property is sold, the State or designated public entities have 60 days after notification to exercise their right of first refusal. The sale is “frozen” during this time, suspending the transfer of ownership. If the State does not respond, the sale becomes final retrospectively.

If the seller fails to notify properly, the State’s right extends to 180 days from the date they become aware of the sale.

Agricultural Pre-emption Rights 

Agricultural pre-emption aims to foster agricultural development by allowing tenant farmers or owners of adjacent land the first chance to buy:

• The tenant farmer directly cultivating the land has priority.
• If no tenant farmer exists, the adjacent landowner has the right.
• The pre-emptor must have habitually cultivated the land for at least two years and meet conditions on farm size and prior land sales.
• The owner must notify the pre-emptor in writing, sending a copy of the signed preliminary sale contract.
• The pre-emptor has 30 days to respond and must pay within three months if they choose to purchase.

If ignored, the pre-emptor can exercise a right of redemption within one year from the registration of the sale deed.

Notably, agricultural pre-emption does not apply between co-heirs, who can freely transfer shares among themselves.

Pre-emption in Commercial Property Sales 

Commercial tenants have a right of first refusal to protect their business location and clientele. This right allows them to redeem the property within six months of sale registration if the owner sells without notifying them or offers a price higher than stated.

Residential Tenant Pre-emption 

Unlike commercial tenants, residential tenants’ right of first refusal is limited and occurs only under specific circumstances. For instance, it applies when:

• The owner sells the property and refuses to renew the tenant’s contract at the first four-year term.
• The owner does not own other residential properties.

If these conditions are not met, the tenant has no right to pre-empt the sale, and the lease continues with the new owner.

Exercising the Tenant’s Right of First Refusal 

The landlord must officially notify the tenant of their intention to sell, including the price and conditions. The tenant then has 60 days to accept or refuse. Silence counts as refusal. In multi-tenant properties, all tenants must agree to exercise the right; if some waive it, the others may still proceed.

The tenant’s right does not apply when the sale is to the owner’s close relatives or within inheritance shares, where co-heirs’ rights take precedence.

Public Housing Pre-emption 

In public residential housing, buyers cannot resell for 10 years without first offering the property to the assigning public entity. This entity has 60 days to buy back the property at the original price adjusted for inflation. Violation invalidates the sale, even without the entity exercising the right.

Family Business Pre-emption 

Family members actively working in a business have a right of first refusal to purchase shares in case of company transfers or inheritance. This safeguards business continuity by giving priority to those involved in its management.

Right of First Refusal Among Co-heirs 

When a person dies, co-heirs form a community of inheritance shares. If one co-heir wishes to sell their share to an outsider, they must notify the other co-heirs, who have 60 days to match the offer. If notification is not given, co-heirs can redeem the share from the outsider or subsequent owners.

This right:

• Applies only to inheritance shares, not to specific assets.
• Is personal and non-transferable.
• Does not apply if the outsider buyer is the spouse of another co-heir under joint property rules.

Conclusion 

The right of first refusal is a nuanced legal mechanism designed to balance property owners’ freedom with protections for tenants, family members, agricultural interests, cultural heritage, and public entities. Whether arising from private agreement or law, understanding its operation is essential to avoid disputes and ensure rights are respected in property transactions.

VGS Family Lawyers is a law firm that offers assistance to English-speaking clients with interests in Italy. In case you need assistance, please write to: info@vgslawyers.com.