Skip to content
×
Try PRO Free Today!
BiggerPockets Pro offers you a comprehensive suite of tools and resources
Market and Deal Finder Tools
Deal Analysis Calculators
Property Management Software
Exclusive discounts to Home Depot, RentRedi, and more
$0
7 days free
$828/yr or $69/mo when billed monthly.
$390/yr or $32.5/mo when billed annually.
7 days free. Cancel anytime.
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
Tax, SDIRAs & Cost Segregation
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated about 11 years ago on . Most recent reply

User Stats

51
Posts
7
Votes
Bennet Sebastian
  • Investor, Rehabber, Broker
  • Orlando, FL
7
Votes |
51
Posts

Legal question - can a valid contract be nullified due to a pre-existing first right of refusal?

Bennet Sebastian
  • Investor, Rehabber, Broker
  • Orlando, FL
Posted

To anyone who might have experience with this,

Facts:

1. I have a fully executed contract to purchase a bank-owned commercial office condo for all cash, closing next Friday. (Roughly 2-week closing period).

2. I am also in negotiations with the adjoining condo unit to purchase their unit so that I can combine the two units and lease the combined space to a medical practice that wants to do a long-term (7-year) lease. Once the transaction is complete and the tenant has moved in, I would then package the property as a net-leased investment sale and sell to a long-term investor.

3. Yesterday, I was notified by the listing broker on the bank-owned unit that the condo docs (which I also just received yesterday) give the association and the other unit owners a first right of refusal to purchase the unit.

4. The right of refusal states that the association and unit owners would have to purchase it based on the same price and terms as any bona fide offer received by a unit owner desiring to sell their unit. They are required to be notified within 5 days of receiving the offer and have 30 days to decide whether or not to execute their right. It appears the bank and listing agent goofed by not taking my offer to the board and instead entering into a purchase contract with me.

Question

Is my contract enforceable?

Thank you in advance for sharing your thoughts.

(Note - Yes, I will definitely consult with an attorney asap but before I do I just want to see if anyone here has encountered a similar situation).

Most Popular Reply

User Stats

2,918
Posts
2,087
Votes
Dion DePaoli
  • Real Estate Broker
  • Northwest Indiana, IN
2,087
Votes |
2,918
Posts
Dion DePaoli
  • Real Estate Broker
  • Northwest Indiana, IN
Replied

"Is your contract enforceable?" Yes.

First right of refusal does not make your contract unenforceable. Having a enforceable contract is not the same as being able to purchase the property though. Even though, we understand what you are really asking.

In most cases, you signed not only the purchase contract with the bank but a contract addendum as well. Usually that gives the bank the right to cancel the contract at any time for any reasons.

That is important because again, your contract is "enforceable". You made an offer and it was accepted and the contract was executed. Can you enforce "Specific Performance" on the contract? Meaning, can you force the bank to sell to you, essentially ignoring the associations first right of refusal. No.

In the event you have suffered damages, such as paying for inspections and other expenses based on thinking you are in a contract and purchasing the property, you may be able to seek reimbursement for those expenses from the bank. The bank had the responsibility to allow the right of refusal to be processed, if they did not, that is their fault. You will not have damages above your expenses in most, if not all, cases.

This is pretty standard stuff. Accidents/errors happen not much you can do.

  • Dion DePaoli
  • Loading replies...