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Rights to Purchase vs. Rights of First Refusal

Rights to Purchase vs. Rights of First Refusal | Disinherited

The distinction between a right to purchase as opposed to a right of first refusal was addressed in the Ontario decision of 2284064 Ontario Inc. v. Shunock 2017 ONSC 7146, which followed the Ontario Court of Appeal decision of 2123201 Ontario Inc. v. Israel Estate 2016 ONCA 641.

Both terms are frequently used in property law, although there is a distinct difference between the two concepts.

The essence of an option to purchase is that forthwith upon the granting of the option, the optionee upon the occurrence of certain events solely within his or her control can compel a conveyance of the property to him or her.

A right of first refusal on the other hand, is an agreement on the part of the owner to allow the right holder the first opportunity to acquire the land should the owner decide to sell.

The jurisprudence establishes that options to purchase create an immediate interest in land, while rights of first refusal do not.

Options to purchase are specifically enforceable, whereas rights of first refusal do not.

Options to purchase are subject to the rule against perpetuities, but rights of first refusal are not.

Options to purchase give the option holder control over the decision to affect a conveyance, while rights of first refusal give the landowner control over the decision to convey.

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