What does a right of first refusal generally mean?
Pre-emption is the right of the pre-emptionist to demand a preferential offer to buy the property on the same terms as the seller would sell the property to another interested party. To give a practical example – if, for example, two friends owned a house together and one had a contractual right of first refusal, then the other would not be allowed to sell their share “just because”. He would first have to offer his share to his friend on the same terms as he would offer it to a third party.
In earlier times, the right of pre-emption was automatic for co-owners, but this changed after 2020. Now, this entitlement to co-owners arises by law if the co-ownership has occurred in the context of an inheritance and the share of one of the heirs is offered for sale within six months of the time when he acquired it (more precisely, according to Article 1124(1) of the Civil Code), and provided that it is not transferred to a close person. In other cases, the right of pre-emption must be expressly agreed contractually, or it must be an exception expressly provided for by law.
Are you solving a similar problem?
Preemption or other unusual arrangements?
Whether you plan to buy or sell a property, there are a number of documents with legal loopholes waiting for you. Don’t risk complications. Within 48 hours we will provide you with a complete contractual and legal service – flawlessly and professionally.
I want to consult
- When you order, you know what you will get and how much it will cost.
- We handle everything online or in person at one of our 6 offices.
- We handle 8 out of 10 requests within 2 working days.
- We have specialists for every field of law.
Pre-emptive right of tenants of the apartment
As mentioned above, the Civil Code also provides for certain specific situations in which the right of pre-emption is also applicable, without the need to establish it contractually. One such situation is the right of pre-emption of the tenant of the apartment. However, it is exercised under very specific conditions:
- the tenant of the apartment unit is a natural person (the right does not apply to legal persons),
- the apartment unit was created by dividing the ownership right to the whole building into ownership rights to individual units,
- the right of pre-emption appliesonly to the first transfer of the unit after the division of the building into units.
The above also applies to the lease of non-residential space if it was leased in connection with a flat in the same building where the above conditions occur. The right of pre-emption shall lapse if the tenant does not accept the offer within six months from the date on which it was effectively delivered to him – i.e. when he became aware of it.
The tenant’s right of pre-emption is activated when the owner enters into a contract of sale in respect of the newly created unit with a third party. At that point, the building owner is obliged to offer the unit in writing to the tenant of the unit on identical terms and for the same purchase price.
As we have already stated, the tenant has a period of six months from the effective date of delivery to accept the offer. during that period, he may accept the offer and pay the owner the agreed purchase price. Otherwise, the right will lapse. However, if he accepts the offer, then the owner’s offer to the third party (the Civil Code refers to the third party as the “purchaser”) is extinguished. If he has even paid the purchase price to the owner, the latter must return it. The position of the “purchaser” is therefore legally uncertain, because for a period of six months the transfer cannot be completed without risking a conflict with the tenant’s pre-emption right. For this reason, such an offer may be unsuitable for those interested in immediate occupation.
Tip for article
Tip: Uncertainty in a given situation can be removed contractually, for example, if the tenant waives its pre-emption right in writing. However, do not embark on such legal modifications without consulting an attorney, as a mistake in the documentation could lead to future complications and years of litigation over the right to purchase or own the apartment.
Pre-emption right of the land owner
The Civil Code also seeks to address situations that have occurred so far where the owner of the land and the owner of the building on it are two different persons. The previous Civil Code allowed for such a regime, which gave rise to many uncertainties and legal disputes, for example in access to the property, use of the land around the house, etc.
The new Civil Code therefore introduced the principle of “superficies solo cedit”, i.e. the surface gives way to the land. This means in practice that buildings are not a separate thing. This therefore applies to land and buildings where the owner of the building and the land is the same person. However, where historically the situation described above has arisen where there are two persons, a further provision comes in to help resolve this unclear situation. According to the Civil Code, the owner of the land on which a building that is not part of the land and has another owner has a legal right of pre-emption over the building. The same applies in reverse – the owner of the building has a pre-emption right to the land on which the building is located.
The above provision of the Civil Code is aimed at eliminating these confusing situations and at integrating ownership by one person where it makes sense.
Example:
Imagine a situation where more than one person owns the land under such a regime, for example, Mr. Peter and Mr. Paul. Mrs. Eva, who owns the building, would have to offer the building to both Mr. Peter and Mr. Pavel under the right of first refusal in the event of a sale. However, if Mr. Petr was not interested in the building, Mr. Pavel could buy the whole building himself, still under the pre-emption right. Therefore, even if Mr Peter is not interested, Mrs Eva may not sell the building to a stranger.
The right of pre-emption in the above-mentioned form also belongs to a legal person, or perhaps to the state, which can exercise it through the State Land Office (formerly known as the Land Fund). This occurs similarly in a situation where the state owns a certain piece of land on which a foreign building is located.
Tip for article
Tip: The previous practice when selling a co-ownership share included the obligation to offer the co-ownership share in priority. This has not been the case for several years. What has been the historical development of this legal regulation of pre-emption rights and what rights are now left to co-owners? This is the subject of our separate article.
Contractual pre-emption right
In addition to the statutory provisions, a pre-emption right may also arise by legal agreement between two parties. However, if it is negotiated as a so-called obligatory one, it has effects only between the parties and is not registered in the land register. The buyer of the property then has basically no chance to find out from publicly available sources whether such a right has been established or not.
If the pre-emption right is established as a so-called right in rem, i.e. if the parties expressly agree that the pre-emption right is against any other owner of the property, then it is registered in the Land Register.
Before any purchase of a property, both of these options should be checked. In the event that no pre-emption right in rem is registered in the Land Registry, it may be advisable to include a declaration by the seller in the purchase contract that no pre-emption right exists. This declaration can be backed up by a contractual penalty, which will provide the buyer with legal certainty in the event that a pre-emption right does appear.
Summary
Preemption today operates primarily as an exception – statutory or contractual – and most situations do not automatically include it. The main statutory cases include tenant pre-emption for a newly defined dwelling unit and pre-emption between the owner of the land and the building if they are different persons. In the case of co-owners, the statutory pre-emption right has been retained only in the case of the transfer of a share acquired by inheritance and only for a limited period of time.
In addition, the right of pre-emption can be established contractually – as a right in rem (with effect against third parties and registration in the land register) or only obligatory (with effect between the parties). Any buyer should be cautious when checking the legal status of the property – especially if the pre-emption right is not visible at first sight.
