A recorded right of first refusal, right of first offer, or option encumbers a parcel of land until exercised, waived with respect to a specific transaction, released, terminated, or expired by its terms. Evidence of exercise, waiver, release, or termination should be recorded to facilitate the assessment whether the right of first refusal, right of first offer, or option was exercised, waived, released, or terminated for any particular transaction. The specific language of any right of first refusal, right of first offer, or option should be scrutinized and strictly construed.
Comment 1: The question whether a right of first refusal touches and concerns the land has not been resolved by the Vermont Supreme Court.
Comment 2: A right of first refusal is an agreement by one person to sell an identified parcel of real property to another when the grantor of the right of first refusal accepts an offer from a third party to purchase the property. The terms of the sale are established by the offer made by the third party. Unless specified otherwise in the instrument creating the right of first refusal, the holder of the right of first refusal must accept the terms of the offer, stepping into the shoes of the party making the offer, to exercise the right of first refusal.
Comment 3: A right of first offer is distinguished from a right of first refusal by the triggering event. A right of first offer is triggered when the grantor of the right of first offer decides to sell the property and not when the grantor accepts an offer to purchase. Terms of the right of first offer may be negotiated at the time the right of first offer is created or may be set by the grantor of the right of first offer when the decision is made to sell the property.
Comment 4: An option is an offer with negotiated terms that is made by one party to another. An option becomes a binding contract when the optionee / offeree exercises the option. Krupinsky v. Birsky, 278 A.2d 757, 129 Vt. 400 (Vt. 1971)
Comment 5: In the absence of express language in the right of first refusal specifying that it applies to future transfers, a right of first refusal found in the land records, along with evidence of a sale or transfer that would appear to have triggered the right of first refusal which occurred more than fifteen years prior to the current search, creates a presumption that the right of first refusal whether exercised or not is no longer enforceable under the statute of limitations on reentry into land. Cf. 12 VSA 502.
Comment 6: A right of first refusal that does not specify the holder’s “heirs and assigns” or “successors and assigns” or some specific group of people (children, family) in the section of the instrument creating the right of first refusal creates a presumption that the right of first refusal does not pass to their heirs, successors or assigns.
Comment 7: Absent evidence to the contrary, a right of first refusal, whether to the holder individually or to the holder and their heirs, successors or assigns, gives the holder one opportunity to purchase in connection with the first sale of the subject property that is completed, and the right of first refusal does not evergreen or repeat for all successive transactions.
Comment 8: In the event a right of first refusal appears in the chain of title and is followed by a deed from the owner of the burdened property to the holder of the right of first refusal, the right of first refusal is terminated by merger.
Comment 9: In appropriate circumstances where the evidence is sufficient, an affidavit may establish that a right of first refusal was not exercised.
Comment 10: The holder of a right of first refusal that is an entity that: (a) is legally dissolved; or, (b) has been administratively terminated, in either case for more than fifteen years prior to the current search creates a presumption that the right of first refusal was terminated.
History
September 2024: Standard was added.