Right of First Refusal: Knowledge of the Pre-emption Right Is Assessed at the Promissory Sale, Not the Deed of Sale

Imagine: you own a flat in Bordeaux, in the Chartrons district. A few years ago, you signed a right of first refusal with your neighbour, Mr. Dupont, giving him the right to buy your property before any other buyer. Today, you receive a tempting offer from a developer. You sign a promissory sale without informing Mr. Dupont. Then, a few weeks later, you reiterate the sale by deed of sale. Mr. Dupont learns of the sale and sues you. At what point must you offer him the property? At the signing of the promissory sale or at the deed of sale? This is exactly the question decided by the French Supreme Court in this judgment of 25 March 2009.

This decision is fundamental for any owner, tenant or real estate professional. It establishes a simple principle: the knowledge of the right of first refusal and of the intention of its beneficiary to exercise it is assessed at the date of the promissory sale, which constitutes a sale, and not at the date of its reiteration by deed of sale. In other words, if you sell a property subject to a right of first refusal, you must offer the property to the beneficiary as soon as the preliminary contract is signed, not at the time of the deed of sale.

But what does this actually change for you? What should you do if you are the beneficiary of a right of first refusal and the seller has not informed you? And if you are the buyer, how can you protect yourself? We will break down this decision and its practical implications, with concrete examples in Bordeaux and Mérignac.

The Facts: A Story Like Many Others

Mrs. X, owner of a house in Mérignac, had granted a right of first refusal to her neighbour, Mr. Y, giving him the right to buy the house first. In 2003, Mrs. X signed a promissory sale with Mr. Z, a property developer, without informing Mr. Y. The promissory sale provided that the sale would be reiterated by deed of sale a few months later. Mr. Y learned of the sale after the signing of the promissory sale and sued Mrs. X for breach of the right of first refusal. He sought the annulment of the sale and damages.

The lower courts (the Court of Appeal) had rejected Mr. Y's claim, considering that knowledge of the right and of the intention to exercise it should be assessed at the time of the deed of sale, not at the time of the promissory sale. However, at the date of the deed of sale, Mr. Y had not yet expressed his intention. The French Supreme Court overturned this reasoning. It considered that the promissory sale constitutes a sale (it is a definitive contract), and that it is at that date that the seller must inform the beneficiary of the right. In this case, Mrs. X had signed the promissory sale knowing that Mr. Y benefited from a right of first refusal and that he wished to exercise it. She should have offered it to him before signing with Mr. Z. The case was referred back to another Court of Appeal for re-trial.

What few people know is that the right of first refusal is not always written. It can be verbal or result from conduct. undefined, I have come across cases where the right was simply mentioned in a letter or email. The difficulty is proving its existence and the beneficiary's intention to exercise it. Here, the right was written, but the issue was about the time when the seller had to perform it.

The Reasoning of the Court — Deconstructed

The French Supreme Court relies on Article 1134 of the Civil Code (former, now Article 1103) which provides that legally formed agreements serve as law to those who have made them. The right of first refusal is an agreement by which a party undertakes to offer a property first to another. The Court recalls that a promissory sale constitutes a sale as soon as there is agreement on the thing and the price. Therefore, it is at this moment that the seller must perform his obligations, including that arising from the right of first refusal.

The Court adds that the knowledge of the right of first refusal and of the intention of its beneficiary to exercise it is assessed at the date of the promissory sale. In clear terms, if the seller knows at the time of signing the promissory sale that the beneficiary wants to buy, he must offer it to him before accepting an offer from a third party. If he does not, he incurs his contractual liability and may be ordered to pay damages, or even the annulment of the sale if the third party was in bad faith.

The decision is a confirmation of previous case law (Civ. 3e, 10 May 1989, no. 87-17.503). It is therefore not a reversal, but it clarifies the starting point of the period for exercising the right. The judges rejected the seller's argument that the beneficiary had not expressed his intention before the deed of sale. The Court considers that it is up to the seller to provoke this expression by informing the beneficiary as soon as the promissory sale. In other words, the seller cannot wait until the deed of sale to hide behind the beneficiary's silence.

However, be aware: this solution assumes that the seller has knowledge of the right and of the beneficiary's serious intention. If the seller was unaware of the right or if the beneficiary had never expressed interest, the solution could be different. But in most cases, the seller knows about the right because he himself granted it.

What This Changes for You — Concretely

For the seller-owner: If you have granted a right of first refusal, before signing a promissory sale with a third party, you must offer the property to the beneficiary by registered letter with acknowledgement of receipt. You must give him a reasonable time (usually 1 to 3 months) to respond. If you do not, you risk being ordered to pay damages equivalent to the loss of chance to buy (often 10 to 20% of the property's value). For example, in Bordeaux, for a property worth €300,000, this could be €30,000 to €60,000. In addition, if the buyer was aware of the right, the sale may be annulled.

For the beneficiary of the right: If you learn that a property has been sold without the seller having offered it to you first, you can take legal action within 5 years from the sale. You must prove that the seller knew of your intention to buy. Keep all writings (letters, emails) where you express your interest. The judgment protects you by fixing the key moment at the promissory sale. If the seller signed a promissory sale without consulting you, you can claim damages for breach of the right.

For the buyer: Before buying a property, ask the seller in writing whether a right of first refusal exists. You can check the land register or the mortgage register. If the seller hides the existence of a right, you could be considered in bad faith if you knew about it. In that case, the sale could be annulled. For example, in Mérignac, a buyer who knew that the neighbour had a right of first refusal saw his sale annulled after 2 years of proceedings.

For the notary: The notary must check the existence of any right of first refusal before drafting the deed. He may be held liable if he fails to mention it. His professional liability may be incurred.

Four Tips to Avoid This Type of Dispute

• Insert a clause in the promissory sale: Have the seller declare that there is no right of first refusal, or, if one exists, that it has been complied with. In case of a false declaration, the seller must compensate you.
• Keep all evidence of your intention: If you are a beneficiary of a right of first refusal, send a registered letter to the seller reminding him of your interest in buying the property. Keep a copy. This will allow you to prove your intention at the time of the promissory sale.
• Check the land registers: Before buying, ask the notary to consult the land register (formerly mortgage register) to detect any published rights of first refusal. Not all rights are published, but this is a first safeguard.
• Set a time limit in the right: When you grant a right of first refusal, provide for a validity period (e.g. 5 years) and a response period (30 days). This will avoid situations where the beneficiary lets years pass without coming forward.

Further Reading: Related Case Law and Developments

This decision is part of a consistent line of the French Supreme Court. As early as 1989 (Civ. 3e, 10 May 1989, no. 87-17.503), the Court had ruled that the breach of a right of first refusal was constituted as soon as the promissory sale was concluded. More recently, it clarified that the beneficiary may seek the nullity of the sale if the third-party buyer was in bad faith (Civ. 3e, 30 January 2008, no. 06-20.677). The trend is therefore protective of the beneficiary. Courts require increased contractual loyalty from the seller. On the other hand, if the beneficiary has never expressed his intention, the seller may freely sell. It is therefore crucial for the beneficiary to express himself clearly and in writing.

For the future, it is possible that case law may evolve towards a broader obligation to inform, for example by requiring the seller to consult the beneficiary even if he has not expressed himself recently. But for now, the seller must act as soon as he has knowledge of a serious intention.

In Practice: What to Do

If you are a seller and have granted a right of first refusal:

1. Before signing a promissory sale, send the beneficiary a registered letter with AR offering him the property at the price and conditions of the planned sale.
2. Give him a reasonable time (30 to 90 days) to respond.
3. If the beneficiary accepts, sell to him. If he refuses or does not respond, you can sell to a third party.
4. Keep a copy of the letter and the acknowledgement of receipt.

If you are a buyer:

1. Before signing, ask the seller in writing if a right of first refusal exists.
2. Have a guarantee clause inserted in the promissory sale.
3. Check with the notary that no right has been published.

If you are a beneficiary:

1. Express your intention in writing as soon as you become aware of a potential sale.
2. If you learn that a sale has taken place without you being consulted, consult a lawyer. You have 5 years to act.
3. Gather all evidence of your right and your intention.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →