Notice of Decision to Sell Real Estate — For Right of First Refusal — RPI Form 162-2

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This form is used by a seller’s broker when entering into a listing to sell property on which another person holds a right of first refusal to purchase it, to prepare the notice to the holder of the right of first refusal of the seller’s decision to sell and the holder’s first refusal right to buy the property.

Your use of RPI Form 162-2

The two types of right of first refusal

A right of first refusal is a pre-emptive right granted by the owner of a property and held by another to buy a property when the owner decides to sell.

A right of first refusal form is usually attached as an addendum to a:

purchase agreement [See RPI Form 150]; or
lease agreement. [See RPI Form 550]

When attached to a purchase agreement — or, alternatively, a counteroffer or escrow instructions — the right of first refusal references a property other than the property being sold under the purchase agreement. The seller grants a right of first refusal to buy another property they own in the event they decide to sell it by using a Right of First Refusal — To Acquire Additional Property form. [See RPI Form 162]

On the other hand, when attached to a lease agreement, the right of first refusal is between the landlord and tenant. Here, the tenant is granted the pre-emptive right to buy the leased premises in the event the landlord decides to sell it. The landlord grants the tenant the right of “first dibs” to acquire the property by using the Right of First Refusal to Buy — Addendum form. [See RPI Form 579]

Pros and cons of a right of first refusal

Before walking a client through a first refusal agreement, ask them to consider the pros and cons.

Advantages for buyers:

priority: the buyer holds the right to the first opportunity to purchase the property when the owner decides to sell;
obligations: the buyer does not agree to buy or otherwise acquire the property when the owner decides to sell; and
security: the buyer has the assurance they can opt to acquire the described property when the owner decides to sell it.

Disadvantages for buyers:

uncertainty: the buyer does not know when the owner might decide to sell, or whether the owner will ever sell the property.

Advantages for owners:

transaction efficiency: when the buyer exercises their right of first refusal on the owner’s notice of their decision to sell, the transaction is more likely to close smoothly as the buyer has already been located and is known to the owner; and
a safety net: the owner has greater certainty they likely have a buyer when they decide to sell.

Disadvantages for owners:

sales options limited: the owner on deciding to sell has agreed to offer the property to the holder of the right of first refusal before unconditionally agreeing to sell it to another person; and
delays: the owner on notifying the holder of the first refusal right of the owner’s intent to sell needs to wait for the holder to decide whether to exercise their right to purchase the property.

Analyzing the notice of decision to sell

A seller’s agent uses the Notice of Decision to Sell Real Estate — For Right of First Refusal form published by RPI when entering into a listing to sell property which is subject to a right of first refusal to purchase. The seller’s agent uses the form to prepare the notice to be served on the holder of the first refusal right that the seller has decided to sell and the holder may exercise their right to buy the property. [See RPI Form 162-2]

The sections of the Notice of Decision to Sell Real Estate — For Right of First Refusal include:

Facts, which state the buyer holds the right to purchase real estate under a right of first refusal agreement, the date of the agreement and the identities of the buyer and seller [See RPI Form 162-2 §1];
A description of the real estate [See RPI Form 162-2 §2];
The purchase price and terms of sale [See RPI Form 162-2 §3];
Notice of right to exercise for delivery to the holder of the first refusal right [See RPI Form 162-2 §4];
The expiration date for the exercise period and steps the buyer is to take to exercise their right to acquire the real estate [See RPI Form 162-2 §5]; and
Signatures of the seller and buyer, with a checkbox to indicate whether the buyer intends to exercise or reject their right of first refusal to purchase the real estate.