Real Estate Tip- How to Purchase Your Rented Space: Options to Purchase & Rights of First Refusal

How to Purchase Your Rented Space: Options to Purchase & Rights of First Refusal

Business owners often rent a building or condominium with plans to one day purchase the property. Requiring a future purchase is too risky for most tenants, but there are two popular ways to assure the possibility of a future purchase:

• An option to purchase for a fixed or formula price
• A right of first refusal, which allows the tenant to meet a price offered by a third party

While these techniques can help a tenant purchase business space, they’re not without issue. Trouble can arise if a tenant initially declines the purchase, then later tries to exercise either agreement against the new property owner.

Courts differ on whether an option to purchase or right of first refusal can survive after being declined. In leases containing both an option to purchase and a right of first refusal, be certain to use crystal clear, separate language regarding the survivability of each.

Today’s real estate tip is brought to you by Rick Smith, a member of Bernstein Shur’s Real Estate Practice Group. Stay tuned for more useful tips for real estate professionals.

For more information on purchasing commercial rental space, contact Rick at rsmith@bernsteinshur.com or 603 623-8700 ext. 8829 or 207 774-1200.