There are many reasons that businesses choose to lease commercial space. Leases require less upfront capital and provide greater flexibility for a growing or changing company. However, when a company is successful in a specific location, leadership may want to remain at that facility indefinitely.
In some cases, the inclusion of specific terms in a commercial lease can protect a business tenant by granting them the option of buying the property if their landlord decides to sell. Notably, the inclusion of the right of first refusal in a lease generally gives a tenant the option to buy if their landlord sells.
How does the right of first refusal work?
The right of first refusal is essentially a clause acknowledging the potential buying rights of a tenant or other party with a contractual interest in a property. The right of first refusal does not necessarily guarantee that the landlord must accept an offer, especially if the property is likely to bring in more money on the open market.
However, landlords do generally need to honor the right of first refusal by advising business tenants of their intent to list the property and granting them an opportunity to make an offer. In scenarios where landlords sell a leased property without providing that opportunity to a tenant, litigation could help resolve the scenario. Buyers may have the option of taking legal action to halt a pending transaction or even seek damages due to the landlord’s refusal to uphold the terms of the lease agreement.
Reviewing the terms of a lease and the listing for a property with a commercial real estate lawyer can help business leaders determine if a contract violation has occurred. Successful real estate litigation can help people enforce contracts or offset losses sustained due to a landlord’s refusal to honor an agreement.