Pre-emption Agreement

Defining Pre-emption Agreement

In a nut shell, a pre-emption agreement, or Right of First Refusal, gives buyers priority to buy property or land. For instance, if you’re a leaseholder or dwelling on someone else’s land, you’re first in line to buy that land. Another scenario is, you’re a property developer with your eye on a property or block of flats. Signing a pre-emption agreement gives you priority to buy or right of first refusal. This is an agreement that applies to residential and commercial property.

Rules Apply

Before putting the property on the market, the seller must first offer to sell it to the pre-emption holder. If the pre-emption holder refuses to buy, the seller is free to put the property on the market. However, there are certain rules that apply. The property can be sold to a third party at an equal or higher price offered to the pre-emption holder. If the sale falls through, the pre-emption holders maintains the right to buy at the previously agreed price.

Who Are The Pre-emption Holders

Pre-emption holders are generally commercial tenants and property developers. It is rare to find a residential tenant with a pre-emption agreement. But this is a potential scenario that can be explored by a residential tenant. For instance, you’re a tenant in an HMO property and you know your landlord is looking to retire. Signing a pre-emption agreement with your landlord would be a profitable option for both you and the landlord.

Loss Of Rights

It’s important to be aware that different rules apply in England, Wales, Scotland and Northern Ireland. Also, bear in mind that the agreement must the registered with the land registry. If the agreement isn’t registered against the owner’s title, the pre-emption holder will loose rights. The buyer can buy the property, but will loose the right to be first in line to buy the property.

Are you planning to buy property from a landlord or seller? If you’d like to talk about the right of first refusal, please get in touch. SG

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