THE JERUSALEM INSTITUTE OF JEWISH LAW 
Rabbi Emanuel Quint, Dean

Lesson # 134 (part five) • Right of First Refusal

This lesson continues the topic of the right of first refusal. That is, Reuven is selling his land to Levi, who does not own land contiguous (next) to the land being sold by Reuven. However, Shimon does own land next to the land being sold by Reuven. If Shimon can match the price and terms paid by Levi, Reuven must sell the land to Shimon. If Reuven has already sold the land to Levi, Shimon can sue Levi in Beth Din, and Beth Din will compel the transfer of ownership of the land to Shimon. The halachah holds that by doing so one complies with “You shall do what is fair and good in the eyes of Hashem” (Deut 6:18).

That is the reason that I am spending so much time on this topic so that the reader can see the development of this concept. Shimon, the next door owner of land cannot hope to purchase land next to his land except for the land now being sold by Reuven. On the other hand, Levi, who does not own land next to the land being sold by Reuven, can buy a parcel of land somewhere else. The last two lessons have discussed exceptions to the application of the doctrine of the right of first refusal. In all the exceptions it would not be fair to Reuven and/or to Levi to have the transfer to Levi voided. This lesson continues with some further exceptions, that is, where the halachah does not give Shimon the right to exercise the right of first refusal. 

There are interesting questions that arise in the following factual situation. Reuven owns land and Aaron is the tenant of the land, paying rent to Reuven. For many purposes a tenant is treated as a purchaser of the land of the lessor (owner) for the period of the lease. Thus perhaps for the purposes of the law of the right of first refusal, Aaron may be deemed to be the owner of the land owned by Reuven. Shimon is the owner of land next to Reuven’s land. There are various questions regarding Aaron, the tenant of Reuven's land. (1) If Reuven sells the land to Levi, a person who does not own land contiguous to Reuven's land, or even to Shimon, who is Reuven's contiguous landowner, does Aaron have the right of first refusal against such sale? (2) If Reuven sells the land to Aaron, does Shimon have the right of first refusal? (3) If Shimon sells his land, does Aaron have the right of first refusal regarding Shimon's land? (4) May Shimon exercise a right of first refusal regarding the lease and insist that Reuven lease the land to him on the same terms? 

There are those who hold that the law of right of first refusal does not apply in any event to Aaron, the tenant of Reuven's land. Thus, the answer to the first three questions will be that (1) Reuven may sell his land to Levi or Shimon and Aaron cannot exercise a right of first refusal; (2) if Reuven sells his land to Aaron, Shimon may exercise a right of first refusal; and (3) if Shimon sells his land, Aaron may not exercise a right of first refusal. 

There is an opinion that Aaron does have the right of first refusal. Thus, if Reuven sells the land to anyone including Shimon, Aaron may exercise the right of first refusal, and if Reuven sells the land to Aaron, Shimon may not exercise the right of first refusal. If Shimon sells his land to Aaron, Reuven may exercise the right of first refusal regarding Shimon's land, even against Aaron. Regarding question 4, here, too, there are various views, the most prominent being that Shimon may exercise a right of first refusal and Reuven must lease the land to Shimon, if the use contemplated by Shimon will not be more burdensome to the land than the use contemplated by Aaron. For example, Aaron has a family of five persons who will be living as tenants in Reuven's house, while Shimon has a family of seven who will be living in Reuven's house, The ages of the children may be a determining factor if there is more wear and tear on the house in the case of Shimon. Beth Din must decide in each case to make the determination of which family will cause more damage to Reuven's house. When the term of Aaron's lease terminates, Aaron may exercise a right of first refusal against another tenant to whom Reuven wants to lease the land or the house. There is an opinion that Aaron may exercise his right of first refusal against a subsequent tenant of Reuven only if Aaron's lease has not yet terminated. But once Aaron's lease has terminated, he is no longer afforded the right of first refusal. 

Reuven has a two-floor building, a store on the lower floor and a residential apartment on the upper floor. Reuven leases the upper floor to Aaron and the lower floor to Moshe. Thereafter, Reuven sells the upper floor to Moshe; Aaron may exercise a right of first refusal regarding his floor. Aaron and Moshe have the right of first refusal regarding the floors they lease if Reuven sells the floors to a third party. 

Reuven leases his field to Aaron and Moshe as partners or joint tenants. Aaron wishes to sell his interest in the lease to Joshua. Moshe may exercise a right of first refusal regarding Aaron's interest in the lease. 

There is also the following exception. A Gentile owns a piece of land. Shimon is the contiguous owner to the Gentile’s land. The Gentile is either selling or leasing the land to Levi, a Jew. Shimon, the contiguous landowner, may not exercise a right of first refusal. Reuven sells or leases his land to a Gentile, Shimon, the contiguous landowner, may not exercise a right of first refusal. Reuven has land between Shimon and a Gentile. Reuven sells his land to Levi. There is an opinion that Shimon may not exercise a right of first refusal. 

There is another exception to the doctrine of the right of first refusal. Reuven sells his land to Levi. Before Shimon has the opportunity to exercise his right of first refusal, Levi dies, and his land is left to his heir Judah. There are authorities who hold that Shimon may exercise his right of first refusal against Judah and some authorities hold he may not, since it was not Judah who acted against the interests of Shimon. Even according to the latter opinion, if Judah sells the land to Issacher, Shimon may exercise his right of first refusal against Issachar. 

Another exception. Reuven donates his land to a charity. Shimon, the contiguous landowner, may not exercise his right of first refusal, even if he offers to substitute land in another place that is appraised to be worth more than the land donated by Reuven. The reason is that Reuven wants the people to know that he donated this land. If the land is exchanged by Shimon for land in another place. Reuven's friends may not remember that he donated the land to the charity. 

There are still other exceptions. I will list only one more, since this is something that shows the thinking of halachah toward development of land. If Levi buys Reuven’s land to build homes on the land and Shimon wishes to add the land to his farm and not build on the land, Shimon cannot exercise his right of first refusal. The reason is that development of the land for homes is more important in many communities than holding the land for farming. There is an opinion that if Levi will plant an orchard of fruit-bearing trees and Shimon will grow grains, then Shimon may not exercise his right of first refusal. Beth Din in each community must determine which use is more in conformity with the development of the community. 

In all those situations in which Levi or Reuven plead that the law of right of first refusal does not apply the burden of proof is on Shimon to show that it does apply. If Shimon cannot prove his allegations, the sale to Levi will be confirmed.

The subject matter of this lesson is more fully discussed in Volume V Chapter 175 of A Restatement of Rabbinic Civil Law by E. Quint, published by Jason Aronson, Inc. and on sale at local Judaica bookstores. 

Questions to quint@inter.net.il