Buying or selling a property involves much more than setting a price and signing a contract. Several legal norms regulate these transactions to ensure the security of the parties and avoid future conflicts. Among these norms, the following stands out: right of first refusal, This legal mechanism grants priority to a specific person to acquire a property before third parties. Understanding this mechanism helps prevent errors during negotiations and significantly reduces legal risks. Furthermore, sellers and buyers can conduct the transaction with greater security from the outset.
Although many people are unaware of this obligation, failure to exercise the right of first refusal can lead to serious legal consequences. Depending on the situation, the transaction may be challenged in court, resulting in compensation and other losses for both the seller and the buyer. For this reason, understanding when this right exists, who can exercise it, and what procedures must be followed is fundamental to conducting real estate transactions safely and avoiding litigation.
What is the right of first refusal when buying property?
The right of first refusal, also known as the right of preemption, guarantees priority for a specific person to acquire a property before the owner completes the sale to third parties.
In practice, when this right exists, the owner must offer the property to its holder under the same conditions negotiated with another interested party. In this way, the legislation protects existing legal relationships and reduces conflicts involving the transfer of ownership.
Furthermore, this mechanism strengthens the security of real estate transactions, preserves rights, and prevents losses for all parties involved.
In what situations does the right of first refusal exist?
The right of first refusal is not present in all real estate transactions. However, Brazilian law provides for several situations in which the owner must respect this priority before selling the property.
Among the main situations are:
- Sale of a rented property;
- Sale of a fractional ownership share between co-owners;
- contracts that establish a right of first refusal clause;
- scenarios outlined in specific legislation.
Furthermore, each situation has its own requirements, specific deadlines, and distinct consequences if the owner fails to fulfill their obligation. Therefore, each negotiation requires individualized analysis before the contract is signed.
Tenant's right of first refusal
One of the best-known hypotheses involves rented properties.
When a landlord decides to sell a rented property, the Tenancy Law stipulates, under certain circumstances, that the tenant has priority to purchase it.
To do this, the owner formally communicates their intention to sell and informs the owner of all the terms of the deal.
This communication should typically include:
- sale price;
- payment method;
- deadline for completing the negotiation;
- financing conditions, if any;
- other relevant clauses.
After that, the tenant can review the offer and decide whether to exercise their right within the legal timeframe. Otherwise, they will lose their right of first refusal, and the landlord can negotiate with third parties.
Right of first refusal among co-owners
Another fairly common scenario occurs when two or more people own the same property.
In this situation, if one of the co-owners intends to sell their share, they must first offer it to the other co-owners.
This rule serves an important practical purpose.
By allowing the other co-owners to acquire the available share, the legislation prevents third parties from entering the co-ownership without giving those who already have a stake in the property the opportunity to increase their participation.
Consequently, it reduces conflicts related to the administration, use, and future sale of the asset.
Right of first refusal stipulated in the contract.
In addition to the situations stipulated by law, the parties themselves may establish the right of first refusal in a contract.
This type of clause usually appears in long-term real estate contracts or in negotiations involving the specific interests of the parties.
Furthermore, the contract must clearly define the deadline for expressing interest, the method of communication, the terms of the offer, and the consequences of any breach of contract.
In this way, buyers and sellers reduce doubts, increase legal certainty, and avoid future litigation.
How should the owner communicate their intention to sell?
When a right of first refusal exists, the owner must formally communicate their intention to sell the property.
This communication needs to present all the conditions of the negotiation so that the holder of the right of first refusal can make an informed decision.
Key information includes:
- property price;
- payment method;
- deadline for completing the sale;
- availability of funding;
- other conditions negotiated.
Furthermore, all information must be clear, complete, and correspond exactly to the conditions offered to the interested third party. In this way, the holder of the right of first refusal can exercise their right with full knowledge of the negotiation.
What happens when the owner does not respect the right of first refusal?
Failure to comply with this obligation may have significant consequences.
In this situation, the injured party may seek their rights before the Judiciary.
Depending on the specific case, consequences such as the following may arise:
- claim for compensation;
- civil liability of the seller;
- discussion regarding the validity of the sale;
- conflicts involving property ownership;
- increased negotiation costs;
- delay in finalizing the transfer.
Consequently, the owner may be held liable for the damages caused and face legal proceedings that could have been avoided.
Could the buyer also suffer losses?
Yes.
Similarly, the buyer also assumes risks when acquiring a property without verifying whether there is a right of first refusal.
If the negotiation disregards the law or contractual clauses, legal disputes may arise that could compromise the security of the investment.
Furthermore, litigation can hinder financing, registrations, future sales, and even the appreciation of the property's value.
For this reason, a document audit before purchase becomes indispensable.
How to avoid problems during buying and selling?
Prevention remains the best strategy to protect all parties involved.
Before signing the contract, it is recommended to:
- Check if there is a current lease agreement;
- Analyze the updated registration;
- to confirm the existence of co-owners;
- Review all contracts related to the property;
- check preference clauses;
- Properly document all communications made;
- to have access to specialized legal counsel.
In addition to these measures, it is advisable to review all documentation before finalizing the negotiation. In this way, buyers and sellers significantly reduce the possibility of future conflicts.
The importance of real estate auditing.
A real estate audit analyzes all documentation related to the property before the transaction is finalized.
In addition, it identifies registration restrictions, legal proceedings, administrative issues, and asset risks that could compromise the transaction.
It also verifies existing contracts, examines the chain of title, and identifies any third-party rights that may affect the transfer of ownership.
Thus, buyers, investors, and sellers can make safer decisions and significantly reduce the risks involved.
The importance of specialized legal advice.
The rules regarding the right of first refusal vary depending on each specific situation.
Therefore, specialized legal counsel analyzes all documentation, identifies any legal obligations, reviews contracts, and guides buyers and sellers through all stages of the negotiation.
In addition to reviewing documents, the lawyer monitors the necessary procedures, clarifies doubts, and proposes preventive solutions to reduce risks.
Consequently, the negotiation takes place with greater security, transparency, and efficiency.
Final considerations
The right of first refusal plays a fundamental role in real estate transactions because it protects people who already have a legal connection to the property and strengthens the security of contractual relationships.
Therefore, before selling a property, the owner must verify if there are any legal or contractual obligations related to the right of first refusal. Similarly, anyone intending to buy should also confirm that all these requirements have been met.
Furthermore, conducting a property audit and having specialized legal counsel allows for the identification of risks before signing the contract, preventing financial losses and legal disputes.
Thus, buyers, sellers, and investors can conclude the transaction with much greater legal certainty, preserving their assets and significantly reducing the possibility of future litigation.
O Dario Carneiro Law Firm Our firm provides legal counsel for real estate sales and purchases, property audits, contract drafting and review, and asset risk prevention. With expert support throughout all stages of the negotiation process, our office offers solutions that guarantee legal security and peace of mind for owners, buyers, and investors.
