THE JERUSALEM INSTITUTE OF JEWISH LAW 
Rabbi Emanuel Quint, Dean

Lesson # 130 (part one) • Right of First Refusal

In 1988, I authored an essay entitled “Lifnim Mishrath Hadin”, that appeared in the Annual Volume of The Council of Young Israel Rabbis In Israel, Vol. 2, Jerusalem. It dealt with the concept that the halachah (Hashem) wants a Jew to act beyond the requirements of the law. This concept of acting beyond the requirements of the halachah has appeared in many of the lessons in this series. It is required by the verse “You shall do what is fair and good in the eyes of Hashem” (Deut 6:18). 

We now begin a series of essays, on the subject of the right of first refusal in halachah, which is based on that concept, that Reuven and Levi as hereinafter described, have to act above and beyond the requirement of the halachah.

Let’s assume that Reuven owns a piece of real estate that he wishes to sell. We shall call this parcel of land that he wants to sell as the “real estate”/ It would seem fair to most people that Reuven should be able to sell the real estate or his interest in the real estate to whomever he chooses. That is a right that most of have grown up with. We know from our western heritage, that unless the transaction is illegal, Reuven may dispose of his real estate as he wishes. But halachah tells us that there are other parties involved in the real estate, although they do not at the present time have any part ownership of the real estate. The other parties are the owners of the lands that are contiguous to the real estate of Reuven. To simplify matters, rather than deal with all of the contiguous owners, we shall deal with only one contiguous owner, whom we have designated as Shimon. Shimon owns the land on all the sides of the real estate owned by Reuven.

Contiguous means that the land of the neighbors touches the real estate of Reuven, and there is no land between the land of Reuven and the land of Shimon. (Again to simplify matters, I have intentionally called Reuven’s parcel of land the “real estate” and the parcel of land owned by Shimon as the “land”). Thus we can make believe that Reuven’s real estate fronts on the corner of Broadway and 42nd Street and Shimon is the owner of the real estate contiguous to Reuven's real estate on both Broadway and also on 42nd Street. Thus there are no other parcels of real estate touching Reuven’s real estate, just Shimon’s. Levi is the person to whom Reuven wishes to sell the real estate or to whom he has actually already sold the real estate. Our discussion proceeds on the theory that Levi does not own any land contiguous to Reuven’s real estate.

Thus Levi can purchase any comparable parcel of real estate somewhere else. On the other hand, Shimon cannot purchase any other parcel that is contiguous to the land that he currently owns. Thus, it is the right thing for Shimon to be able to purchase the real estate being offered by Reuven to Levi upon the same terms as he offers it to Levi. And if the real estate has already been sold by Reuven to Levi, Shimon should be able to acquire the real estate from Levi for the price he paid to Reuven. Weighed against this idea of doing the right thing for Shimon is the countervailing idea of not harming Reuven or Levi while trying to protect Shimon's interest. This series of lessons sets forth how the halachah protects the interests of Shimon, Reuven, and Levi. Since the law in this topic restricts Reuven's right to dispose of his real estate the way he desires and restricts Levi's right to purchase whatever real estate he wants that is for sale, there are severe restrictions under which Shimon may exercise his right of first refusal. Therefore, there are groups of persons who may not benefit by the law of right of first refusal since it would not be the right thing to include them in the law. 

Shimon's right to so purchase the real estate being sold by Reuven is designated by me as the right of first refusal. That is, Shimon has the right to match the terms offered by Levi. That is, if Levi and Reuven have agreed that Levi will pay $1,000 for the real estate, Shimon may pay the same amount, $1,000 to Reuven and Reuven must sell the real estate to Shimon. 

The order to be followed in these lessons are as follows: first, I will set forth the law of the right of first refusal followed by cases in which the law of right of first refusal does not apply, that is, situations that are exempt from this law. Then, the following issues will be discussed: who may exercise the right of first refusal; husband of neighbor; time within which to exercise the right of first refusal; neighbor must be ready, willing, and able to buy; force majeure; the exercise of the right must not cause loss to seller; sale on condition; the purchase price to be paid by Shimon when he exercises his right of first refusal; more than one neighbor; partial exercise of right of first refusal; fraud by seller; waiver of right of first refusal; exercise of the right of first refusal in error; and non-right of first refusal priorities. 

To recapitulate, assume that Reuven is the owner of a parcel of real estate that he wishes to sell. Shimon is the owner of a parcel of land contiguous to the parcel of real estate that Reuven wishes to sell. Levi does not own any land contiguous to the real estate being sold by Reuven. 

Whenever Reuven desires to sell his interest in the land to Levi, he must first offer to sell the land to Shimon upon the same terms as offered to Levi. If Reuven actually already sold the real estate to Levi without first offering the real estate to Shimon, Shimon can demand in beth din, that Levi transfer the real estate to Shimon upon Shimon reimbursing Levi for the purchase price that Levi paid to Reuven. Levi is deemed to be Shimon's agent in purchasing the real estate on behalf of Shimon; the witnesses to the sale to Levi are authorized to write a new deed from Reuven to Shimon. No new transfer is necessary to transfer title from Reuven to Shimon.

This applies to all interests in real estate, whether the real estate is commercial, industrial, or residential. It applies to all things attached to the real estate. There are communities where the synagogue sells the seats and permits the purchaser of the seat to sell it to a third person, usually someone who must first be approved by the synagogue. There is ample authority that the right of first refusal applies to seats in a synagogue. Thus, if Reuven wishes to sell his seat to Levi, Shimon, who owns the next seat, may exercise his right of first refusal against Levi. Beth Din must determine any disputes relating to the synagogue. 

The right generally does not apply to chattels and personal property. If Reuven and Shimon jointly own personal property, and Reuven desires to sell his interest in it to Levi, Shimon does not have a right of first refusal since it is not real estate. However, if Beth Din determines it is detrimental for Shimon to be a joint owner with Levi in the personal property, it may order that Reuven’s interest be offered first to Shimon. The examination by Beth Din is not based on the law of right of first refusal but rather on general equity principles. 

The right applies whether Reuven personally sells the land to Levi or sells it to Levi through an agent. 

Since the topic is one that teaches a person how to act even beyond that which the halachah requires, I will, IYH, go into much detail in the coming lessons. 

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

Questions to quint@inter.net.il