THE JERUSALEM INSTITUTE OF JEWISH LAW 
Rabbi Emanuel Quint, Dean

Lesson # 128 (part two) • Buy or Sell Options 

We are continuing on the topic where Reuven and Shimon are joint owners of a parcel of real estate. Reuven (or Shimon) wants to terminate their joint ownership over the parcel. Reuven makes a demand to Shimon that Shimon either buy Reuven’s ownership in the real estate or sell Shimon’s ownership to Reuven for a price stated in the demand. 

If Reuven makes the demand on Shimon to exercise the option to sell or buy and Shimon exercises the option to buy, he may request that Beth Din grant him up to thirty days to make payment. It may be that Shimon, who did not anticipate that Reuven would make the demand, does not have ready cash available to pay for the land. On the other hand, if Shimon exercises the option to sell, Reuven must make immediate payment, since he should have anticipated that he may be called upon to purchase if Shimon exercises his option to sell. If Reuven does not immediately pay, then his demand is voided, and if he once again makes a demand, Shimon can request that Beth Din ascertain whether or not Reuven has the money to purchase if Shimon decides to sell. 

Assume that Reuven makes a demand by giving Shimon the option to purchase or sell. The demand states that if Shimon elects to buy he will have thirty days in which to make the payment. The demand also states that if Shimon elects to sell his share of he land to Reuven that Reuven will also have thirty days to make the payment to Shimon. This type of demand is not valid, if Shimon can prove to Beth Din that Reuven will not be able to pay at the end of the thirty days. 

If Reuven does not have the money to purchase, he cannot make the demand to sell. This is true even if he price fixed by Reuven is a very low price so that there is incentive for Shimon to buy Reuven’s share. 

As was stated in last week’s lesson, the concept of the buy or sell option is based on a person doing that which is right and correct in the eyes of the Lord. (Deut 6:16) The Torah (Hashem) considers this procedure to be something that is right and correct. A situation may arise where Reuven is wealthy and Shimon is poor and Reuven will take advantage of the situation by making a demand with a very low price for the shares, knowing that Shimon cannot even pay such a low price. Thus Shimon will have to sell to Reuven for the low price.

Theoretically, Shimon, if he is able, may borrow the money and buy Reuven's share. But in all likelihood Reuven has ascertained that it is difficult for Shimon to borrow the money before Reuven made the demand. Or Shimon may sell his share to Levi. When Shimon sells his share to Levi it includes the sale of the right to exercise the option to sell or buy made by Reuven's demand. Then Levi can purchase Reuven's share for the low price that was included in Reuven's demand. For example. the land is worth $200 and thus the share of each joint owner is worth $100. Reuven makes a demand that Shimon purchase Reuven's share for $40 or sell his share to Reuven for $40. Reuven knows that Shimon does not have the $40. Shimon can sell his share to Levi for $100 and then Levi can exercise the option and purchase Reuven's share for $40. Levi will own the $200 land for $140 and Shimon will not bear any loss. 

If Shimon is not able to borrow the money or is not able to sell his share to Levi, then Shimon may go to Beth Din to have it establish a true price for the share and then Shimon will exercise the option of selling his share to Reuven for its full price, 

If both parties want to sell and neither wants to buy, neither will make a demand; the parties may sell to a third party who offers the highest price for the combined shares of both Reuven and Shimon. If one of the parties has a relative or close friend who wants to purchase his share, both shares must still be sold as one package. If both parties want to buy and neither wants to sell, or if both want neither to sell nor to buy, they will remain as joint owners in the ownership of the land or personal property and together use the jointly owned thing. 

If the thing owned jointly does not lend itself to be used together, then if it can be rented, they will rent the thing and they divide the rental payments. Or either party may make a demand to the other to either lease or rent his part of the thing owned jointly at a rental fixed in the demand; then the other party must exercise his election. Here is an example given in the codes: Reuven and Shimon, brothers, inherited from their father a bathhouse or a building containing an olive press, neither of which lends itself to division. Reuven is wealthy and Shimon is poor. 

They may follow their father's example. (1) If he rented it out they will rent it out and divide the rental. Even if the father did not rent it out they may rent it out and divide the rental if they find a lessee. (2) If their father did not rent it out but used it for himself, and if they do not find a lessee they may use the property as did their father and divide the income from the business. There is an opinion that if their father did not lease it out. they may not do so, if either brother protests. Or either Reuven or Shimon can demand of the other brother that he rent it at a fixed rental or lease at that rental to the brother making the demand. If the thing cannot be rented, then the parties will agree or cast lots as to who will use it for a reasonable period and then the other party will use it for a similar period. If the usage by Reuven was not by agreement between the parties but rather was used by him because Shimon was not present or if he was present but did not stop Reuven, then Shimon cannot demand that he be given equal usage. Rather the equal usage will commence from the time that Shimon protests that he, too, wants to use the thing and then one will use the thing and the other will thereafter use it for a similar period of time. If Reuven leases the thing without the consent of Shimon, the rental must be divided equally between them.

Whenever an equal division is mentioned, it assumes the parties are equal owners in the realty or personal property. If one owns a greater share, then they share proportionately as to income and as to time. All of the foregoing is subject to the orders of a Beth Din if the parties cannot agree. 

The next lesson will IYH be the last one on this topic. 

The subject matter of this lesson is more fully discussed in Volume V Chapter 171 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