Right of First Refusal: When & Who Has the Right?
When buying or selling a property, I often observe that the parties take the question of the right of first refusal (elővásárlási jog) lightly, or only confront its existence at the last minute. Yet, if a property is encumbered by a right of first refusal, ignoring it can have severe legal consequences: the beneficiary may even acquire the property through litigation, rendering the contract you concluded ineffective against them. As an attorney, I consider it a priority to provide full security to both sellers and buyers by thoroughly examining the land registry extract and obtaining the necessary waiver declarations.
What is the Right of First Refusal and Where Do We Encounter It?
The right of first refusal is essentially an entitlement that grants priority to the beneficiary to purchase the property. This means that if the owner wishes to sell the property, they must first communicate the received purchase offer in its entirety to the beneficiary of the right of first refusal. If the beneficiary accepts the offer within the specified deadline, the contract is automatically established with them instead of the original buyer.
Legally, we distinguish between two main groups. One is the contractual right of first refusal, which the parties can establish themselves, and which is regulated under Hungarian law by Section 6:218 of the Hungarian Civil Code (Ptk.); this right must be registered in the land registry to be effective against third parties. The other group is the statutory right of first refusal. This includes, for example, the strict rules under Act CXXII of 2013 on the Sale of Agricultural and Forestry Land (the Land Law / Földtörvény), where local farmers, neighbors, or the state have priority, as well as the co-owners' rights of first refusal stipulated in the deeds of foundation of condominiums.
Who Can Have a Right of First Refusal and in What Cases?
Co-owners in the Case of Undivided Joint Ownership
In my experience, the most common case is undivided joint ownership (osztatlan közös tulajdon), such as houses with shared yards, semi-detached houses, or parking spaces in condominium garages. Here, under the Hungarian Civil Code, co-owners have a statutory right of first refusal on each other's ownership shares. It is also common for condominiums themselves to stipulate a right of first refusal in their Deed of Foundation (Alapító Okirat) in favor of the members, even for individually owned apartments.
Agricultural Land and the Rules of the Land Law
The sale of agricultural land takes place according to a particularly strict schedule. Under the Land Law, the state, local farmers, neighbors, and tenants can exercise their right of first refusal according to a specific ranking. For these transactions, the contract must be posted at the local mayor's office, giving the beneficiaries the opportunity to make a declaration.
Tenants and Other Contractual Beneficiaries
In lease agreements, the parties often stipulate a right of first refusal in favor of the tenant, ensuring that if the owner sells the leased apartment or commercial premises, the tenant can step into first place. In addition, individuals and companies can establish such a right by contract at any time if their economic or family interests so require.
The Strict Procedure for Exercising the Right of First Refusal
If the property is encumbered by a right of first refusal, the seller must communicate the received and accepted purchase offer in its entirety and in writing to the beneficiary. This communication must contain all essential terms of the sale, primarily the purchase price and payment deadlines. The beneficiary must generally be provided with a reasonable deadline to make a declaration, which in practice varies between 8 and 60 days depending on the type of property.
If the beneficiary declares within the deadline that they wish to exercise their right and accepts the terms in the purchase offer, the sale and purchase agreement is established between the seller and the beneficiary. If the beneficiary explicitly waives their right, or does not reply within the specified deadline, the property can be sold to the original buyer under the conditions set forth in the offer.
Severe Consequences: What Happens if We Bypass the Beneficiary?
If the owner fails to communicate the purchase offer to the beneficiary of the right of first refusal, the concluded sale and purchase agreement will be ineffective (hatálytalan) against the beneficiary. Under Hungarian law, this means that the beneficiary can demand before a court that the contract be declared to have been established between them and the seller.
For a buyer, this is the ultimate nightmare: you pay the purchase price, perhaps start renovations, and then lose the property due to the intervention of the beneficiary. Therefore, I recommend that before concluding a contract, we always have an attorney check the land registry extract and the condominium Deed of Foundation, and obtain the appropriate waiver declarations.
Frequently Asked Questions About the Right of First Refusal
Is a waiver declaration required from neighbors for every condominium apartment sale?
No, condominium apartments are generally individually owned, so co-owners do not have an automatic right of first refusal. However, the Deed of Foundation must always be checked, as the co-owners may have stipulated this right in favor of each other.
What happens if the beneficiary of the right of first refusal is abroad and unreachable?
According to Hungarian judicial practice, if obtaining the declaration would involve extraordinary difficulties or significant delay (for example, because the beneficiary's address is unknown or they live abroad and are unreachable), the seller may be exempted from the obligation to communicate the offer. However, this must be documented extremely carefully to avoid subsequent legal disputes.
Does the right of first refusal apply in the case of a donation?
No. Under Hungarian law, the right of first refusal can only be exercised in the event of a sale (transfer of property for consideration). If the property is donated as a gift, or if a support agreement (tartási szerződés) is concluded for it, the right of first refusal does not apply.
How Can I Assist You?
The sale and purchase of real estate encumbered by a right of first refusal requires professional expertise and precise administration. In my office, I undertake the comprehensive analysis of land registry extracts and deeds of foundation, the preparation of compliant purchase offers and waiver declarations, and the legal management of the entire sale and purchase process.
Prevent subsequent legal disputes and litigation! Contact my office, and I will ensure that the sale and purchase is lawful and secure in every aspect. Click here to request a consultation appointment!
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