The Right of First Refusal in Real Estate Law

The right of first refusal is a key legal instrument in real estate contracts, whose significance and complexity are often underestimated. It grants a specific person—the beneficiary—the right to purchase a property under the same conditions offered to a third party. Its purpose is to protect the beneficiary from an unwanted change of ownership and to allow them to "step into" the transaction.

The legal basis is set out in §§ 1072 to 1079 of the Austrian Civil Code (ABGB). These provisions may be modified or waived by contract. The right of first refusal belongs to the category of conditional purchases and rights of formation, allowing the beneficiary to establish a contractual relationship through a unilateral declaration without the consent of the other party. The seller remains free to decide whether and to whom to sell, but the purchaser may be restricted to the beneficiary.

Typically, the right is granted free of charge as part of other agreements—such as purchase, exchange, donation, lease, or leasehold agreements. Testamentary dispositions are also possible. Notably, the right is not limited to real estate but may also apply to movable property, corporate shares, registered shares, or rights. It can also play a role in exchanges, restructurings, fiduciary transfers, or gifts.

For legal enforceability, the right of first refusal is usually registered in the land register. The formal requirements of the purchase contract also apply to the agreement on this right. If the main contract is invalid, the right of first refusal is usually void as well.

The right of first refusal becomes exercisable when the seller receives a binding third-party offer or concludes a purchase agreement. At this point, the beneficiary must be informed in writing—including all contract details of the third-party transaction. From this moment, the exercise period starts: 24 hours for movable items and 30 days for real estate by law—though usually extended by contract.

Formal errors in the notice can prevent the period from beginning. Exercise requires only a simple written statement—without notarization—and must be timely. Electronic transmission (such as email) is possible if agreed contractually. If the transfer is made by exchange or contribution rather than cash, the "redemption price" is often determined by an independent appraisal.

Escrow handling is only required if contractually agreed but is common practice. Without an escrow confirmation, the exercise period does not start. The beneficiary may usually influence the trustee's selection.

Before the right becomes exercisable, the seller may not dispose of the property in a way that frustrates the right. However, they are not obliged to maintain the property. Compensation for improvements exists only in limited cases.

The right remains valid as long as it is registered. If waived or not exercised, deletion from the land register occurs ex officio. A written declaration of non-exercise is required.

Finally, the exact scope—including possible exceptions—depends solely on the contractual arrangement. Typical exceptions include intra-group transfers or transfers to close relatives, which must be explicitly stated.

Conclusion: The right of first refusal is a complex legal tool requiring precise contractual agreements, strict compliance with formal requirements, and careful implementation to ensure its effectiveness in practice.