AA - 2017

Author:  Maryna Botha – STBB
  21 November 2017

THE RIGHT OF FIRST REFUSAL  

A simple assumption unleashes unintended chaos

A right of first refusal is an ancillary or collateral agreement whereby one person binds himself to give preference to another person should he or she decide to sell his property.

Most of us have encountered sale or lease agreements with a right of first refusal. These clauses often come in harmless language such as –

The tenant shall have a right of first refusal to purchase the premises when the lessor intends to sell. The purchase price shall be negotiated when the lessor expresses such an intention.

This was the clause, almost verbatim from the recent case of Mokone v Tassos Properties CC 2017 CC. However, rather than being a simple and standard term of the lease agreement, the parties were embroiled in litigation all the way to the Constitutional Court with the tenant attacking the subsequent transfer of the property by the landlord to a third party.

The Judgment can be viewed here: