What happens with Right of first refusal for real estate if holder does not respond

[barn0wl]

What is the name of your state (only U.S. law)? AZ

We have contracted to purchase a property. There is a holder of a right of first refusal. The seller delivered a copy of the contract and deposit check immediately so holder is aware of the transaction. The holder refuses to communicate with either the seller or buyer. They will not indicate if they intend to exercise their right by submitting a comparable offer or to formally terminate their right. They have just gone silent. Does the holder of the right lose it at some point if they do not a comparable offer? Or can they use non-response to make the sale fall through?

 

[quincy]

What is the name of your state (only U.S. law)? AZ

We have contracted to purchase a property. There is a holder of a right of first refusal. The seller delivered a copy of the contract and deposit check immediately so holder is aware of the transaction. The holder refuses to communicate with either the seller or buyer. They will not indicate if they intend to exercise their right by submitting a comparable offer or to formally terminate their right. They have just gone silent. Does the holder of the right lose it at some point if they do not a comparable offer? Or can they use non-response to make the sale fall through?

A "right of first refusal" contract should have a time within which the "first" buyer must remove all contingencies and follow through with the purchase or lose the house. Usually the time is somewhere around 48 hours or so after a second offer comes in, but this is negotiated in advance and can be whatever the parties agree. A non-response is not acceptable.

 

[HRZ]

absent written language to contrary the holder might take a bit of time to respond...more then others might like ...but I agree with Quincy, a protracted delay is not acceptable in business context **************I do not think holder should enter a comparable offer , that invites debate, the holder best execute an exact match .

 

[barn0wl]

absent written language to contrary the holder might take a bit of time to respond...more then others might like ...but I agree with Quincy, a protracted delay is not acceptable in business context **************I do not think holder should enter a comparable offer , that invites debate, the holder best execute an exact match .

The Right of 1st refusal was poorly written. It simply states that the holder has an interest in the sale, which is a right of 1st refusal and the property is described. There was no consideration given by the holder to the seller. There are no additional clauses, like expiration dates, time limits, perfromance clauses, contingencies, etc. The holder recorded the document with the county.

The seller, buyer and holder are acquaintances.

We originally contracted about 6 weeks ago, giving the holder 48 hours to decide if holder wanted to match the offer. The holder did not reply. At that time, we let the contract lapse to the detriment of the seller. We have now entered into a 10 day contract with nearly identical terms, attempting to give the holder time to respond. We have contacted holder multiple times through email, asking that holder sumbit matching offer or formally terminate their Right. We do not want the holder to feel the rug was pulled out from under them. So the holder has been aware of the offer for over 6 weeks and simply will not respond.

The holder has been contacted by the seller many times, through phone calls and emails, and actually had to have the 10 day contract hand delivered by seller's attorney because holder would not accept documents from seller. I attempted to call holder and was told the matter would not be discussed with me.

The 1st right is ill defined and ambiguous and may be uninforceable anywaye. But at what point does the holder forfit any interest in the property because of inaction, simply not responding?

 

[HRZ]

Laymans view..the holders rights are terminated only when the judge orders them to pick to exercise by XX or else they terminate and no further appeal is taken .

While it might make business sense to set timelines , I doubt legally the buyer and seller can set a time line as to holders rights. And it may be tough to get financing or title insurance with a recorded right in place.

IF seller wants the deal to move forward the seller best resolve it with holder ...get him or her to buy it or possibly PAY for surrender of right . It may be cheaper and faster to pay for a recorded surrender than other legal steps

OR you "buy " the right .from the holder? .

 

[barn0wl]

Laymans view..the holders rights are terminated only when the judge orders them to pick to exercise by XX or else they terminate and no further appeal is taken .

While it might make business sense to set timelines , I doubt legally the buyer and seller can set a time line as to holders rights. And it may be tough to get financing or title insurance with a recorded right in place.

IF seller wants the deal to move forward the seller best resolve it with holder ...get him or her to buy it or possibly PAY for surrender of right . It may be cheaper and faster to pay for a recorded surrender than other legal steps

OR you "buy " the right .from the holder? .

Thank you for your response.

The property in question is a trailer. There is an MVD title so no title insurance or financing is required. It is a cash sale of personal property. Those would not be the hangup.

My concern is that the holder can simply refuse to respond, force successive contracts to expire and eventually dictate price reductions by the seller by neither submitting a duplicate offer nor terminating the right. Just stalling. That does not seem to be the purpose of a first right, which, if acting ethically, should be to purchase ahead if the buyer or terminate the right. Assuming reasonable timeframe to repond, which at this point is nearly 2 months.

 

[quincy]

The Right of 1st refusal was poorly written. It simply states that the holder has an interest in the sale, which is a right of 1st refusal and the property is described. There was no consideration given by the holder to the seller. There are no additional clauses, like expiration dates, time limits, perfromance clauses, contingencies, etc. The holder recorded the document with the county.

The seller, buyer and holder are acquaintances.

We originally contracted about 6 weeks ago, giving the holder 48 hours to decide if holder wanted to match the offer. The holder did not reply. At that time, we let the contract lapse to the detriment of the seller. We have now entered into a 10 day contract with nearly identical terms, attempting to give the holder time to respond. We have contacted holder multiple times through email, asking that holder sumbit matching offer or formally terminate their Right. We do not want the holder to feel the rug was pulled out from under them. So the holder has been aware of the offer for over 6 weeks and simply will not respond.

The holder has been contacted by the seller many times, through phone calls and emails, and actually had to have the 10 day contract hand delivered by seller's attorney because holder would not accept documents from seller. I attempted to call holder and was told the matter would not be discussed with me.

The 1st right is ill defined and ambiguous and may be uninforceable anywaye. But at what point does the holder forfit any interest in the property because of inaction, simply not responding?

I suggest you have your attorney draft a letter to the holder of rights (certified, return receipt requested) advising that an offer has come in on the property and will be accepted if the rights-holder does not exercise their rights within X number of hours after recorded receipt of the letter.

Then wait the X number of hours and sell the property.

Your attorney can direct you.

Good luck.