Daily Development for
Friday, January 29, 1999
by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
OPTIONS; RIGHT OF FIRST REFUSAL; NOTICE: Right of first refusal requires property owner, before selling the property to a third party, to offer it to the holder of the right on the same terms it is willing to accept from the third party, but owner does not have to provide the holder of the right with proof of the third party's offer.
Briggs v. Sylvestri, 714 A.2d 56 (Conn. App. 1998).
Lessee George P. Briggs was one of four siblings who had equal shares as tenants in common in certain property inherited from their father. Lessees long term lease had a provision that stated: And George P. Briggs be given a first option to purchase said property if for sale in the future.
Subsequently, Sylvestri offered to purchase the interests of each of the other three cotenants. Two of them sent a letter to George informing George of the offer and setting forth the terms. George responded with a request for an additional sixty days to react to that offer, and the two cotenants complied.
George did not act during that sixty day period. At the close of the period, Alfred Briggs, one of the two cotenants who supplied notice to George sold his interests to Sylvestri. Further, the fourth cotenant, who had not given notice to George, also sold to Sylvestri. George later notified Alfred of his desire to purchase the interest that Alfred had sold, and Alfreds attorney wrote to George telling him that the sixty days had expired and that his offer was rejected. Subsequent to that letter, the other notifying cotenant sold to Sylvestri.
George brought suit for specific performance as to all three interests. As to the two interests who had given him notice, he argued that the notice did not include evidence of Sylvestris offer, although it described the offer. The trial court rejected that argument and refused specific performance. As to the fourth cotenant, however, who did not give George formal notice, the court awarded specific performance.
On cross appeals: held: Affirmed: Although the somewhat vague language of the lease provision will be construed as a right of first refusal as to each of the three cotenancy interests, George loses as to the two cotenants who gave him notice. There is no implied requirement that the competing offer be documented. The only requirement is reasonable opportunity to meet the competing terms, and the sixty days provided by the cotenants was sufficient.
The fourth cotenant argued that the trial court had erred in concluding that George was ready, willing and able to exercise the specific performance right, and the court simply affirmed this finding of fact.
Comment 1: There are three points worth noting - all somewhat minor, but potentially important in a given transaction.
First, note that construed this contract as a right of refusal for each of the three cotenancy interests, as opposed to one relating only to a potential sale of the property as a whole. This seems appropriate under the circumstances, but represents somewhat of a stretch of the language.
Second, consider the notion that a party subject to a right of first refusal has no duty to document the competing offer as a condition of triggering the required response by the holder of the right likely is inconsistent with some lawyers expectations and with practice. This simply underscores that a well drafted right of first refusal should include a specific requirement that the competing offer be provided along with the notice of it. The outside offer is not only the trigger for the right of first refusal, it is the beginning of a process that may result in that right being swept away. The holder of the right ought to have the ability to see the offer to be comfortable that it is bona fide.
Third, note that the court ordered that Sylvestri specifically perform the right of first refusal, rather than leave George with a damages claim against his sister, who actually was the one who violated the right. The court had equitable discretion to do this since Sylvestri had knowledge of the right of first refusal and bought at peril if the right was not extended by notice to George. This also provides a useful practice tip. Purchasers of property subject to a right of first refusal certainly have a strong interest in seeing to it that the holder of that right be given a fair and proper opportunity to exercise it, because that is the best way to clear the title of that interest. Contracts that involve sale of such interests should give the buyer the right to receive evidence of the process and perhaps even some voice in how it is carried out where, as here, the appropriate form of notice, particularly as to time, is somewhat vague.
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