Daily Development for
Monday, April 22, 1996

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

LANDLORD/TENANT; TENANT EXPANSION; RIGHT OF FIRST REFUSAL: In exercising a right of first refusal to rent space, the party holding the right need only match the economic terms of the lease subject to the right, and other special factors inducing the landlord to deal with the other proposed tenant have no impact on the holder of the right. Hahalyak v. A. Frost, Inc., 664 A.2d 545 (Pa. Super. 1995)

Here, the third party tenant had agreed to vacate other space leased from landlord in order to acquire space in question - apparently an item of value to the landlord. The court here held that such agreement was not relevant to the right of first refusal, as tenant's right of first refusal only required it to agree to same terms as those offered by a bona fide third party to rent the space in question. Trial court properly enjoined landlord from leasing the space to the third party.

Reporter's Comment: This decision denied the landlord the benefit of a substantial "acquisition fee" from the third party relocating tenant and a second similar "acquisition fee" from any new tenant who might occupy the third party tenant's vacant space. The court did not recognize these lost "acquisition fees" as part of the third party's offer and did not require the tenant to match either of them as part of its option cost.

Editor's Comment 1: If, as seems to be the case here, the landlord received special, economically measurable, value as a consequence of leasing to the third party tenant, such value should be considered as part of what the party holding the refusal right must match.

Editor's Comment 2: Just one more drafting lesson. Clients and lawyers often complain about the length and complexity of our documents, and of the wrangling to get the language resolved, but cases like this make clear that what is "unwritten but assumed" often doesn't exist at all.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. This item, however, has not been. It is an April Fool story. But no one ever reads this fine print anyway. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last five years, these Reports annually have been collated, updated, indexed and bound into the annual Survey of Developments in Real Estate Law, volumes 1-5, published by the ABA Press. The Annual Survey volumes are available for sale to the public. Contact Laprica Mims at the ABA. (312) 988 5260.

Items reported here and in the ABA publications are for general information (and, in this case disinformation) purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.