Right of first refusal

Right of First Refusal - The right of first refusal is the legal or contractual right of a person, a tenant, or a municipality to purchase a property or parcel of land under the same terms that a third party has already agreed upon with the seller. It is recorded in Section II of the land register and can significantly influence the sale of a property.

What exactly does the right of first refusal mean?

The right of first refusal gives the beneficiary the opportunity to step into a purchase agreement already concluded between the seller and a third party-meaning they purchase under exactly the same terms. The right is only triggered when the owner enters into a valid purchase agreement with another buyer. The beneficiary must decide within a statutory period of two months whether to exercise their right.

Under German law, a fundamental distinction is made between the statutory right of first refusal and the contractual (contractual or real) right of first refusal. The contractual right of first refusal is individually agreed upon between the parties and can operate as a contractual right only between the contracting parties or be registered as a real right in Section II of the land register. Only the in rem variant is effective against any subsequent purchaser and remains in force even in the event of a change of ownership.

Two statutory preemptive rights are particularly relevant in practice: The municipal preemptive right under Section 24 of the German Building Code (BauGB) allows municipalities to acquire real estate in certain areas on a priority basis-such as in redevelopment areas, areas with a zoning plan, or in areas designated for social housing. The municipality must exercise its right of first refusal within two months of notification of the purchase agreement and may only do so if justified by the public interest.

The tenant’s right of first refusal under Section 577 of the German Civil Code (BGB) arises automatically when a rented apartment is converted into condominium ownership and is subsequently to be sold to a third party. The tenant then has the right to purchase the apartment themselves under the terms of the purchase agreement. This right cannot be contractually excluded and protects tenants from displacement due to conversion into condominiums.

Declaration of Waiver of Right of First Refusal and Land Registry Entry

In practice, the municipality’s declaration of waiver of the right of first refusal is a key document in every real estate sale. The notary is obligated to inform the relevant municipality of the purchase agreement. The municipality then checks whether a statutory right of first refusal exists and either issues a waiver or exercises the right of first refusal. Without this declaration, the transfer of ownership cannot be completed in the land register-it is therefore a necessary prerequisite for the transfer of title.

A real right of first refusal is entered in Land Register Section II (Encumbrances and Restrictions). Buyers should always review a current land register extract before purchasing a property to determine whether such a right exists. The cancellation of a registered right of first refusal requires the consent of the entitled party in a notarized form.

Practical Tip for Property Owners in Nuremberg and Franconia

In the Nuremberg metropolitan region, several districts and municipalities have urban planning statutes that establish municipal preemptive rights-particularly in formally designated redevelopment areas such as parts of the Old Town, Gostenhof, or St. Leonhard. Anyone wishing to sell a property in these areas must expect a longer processing time until the City of Nuremberg issues a waiver of the right of first refusal.

Our network of experts recommends that sellers inquire with the relevant real estate office before marketing the property to determine whether a municipal right of first refusal applies to the property. This helps avoid delays in the sales process. Buyers should ensure that the purchase agreement includes an appropriate withdrawal clause in the event that the municipality exercises its right of first refusal.

Frequently Asked Questions

Can a right of first refusal be inherited?

A contractual right of first refusal is generally not inheritable or transferable, unless inheritable status has been expressly agreed upon. A real right of first refusal, on the other hand, is tied to the property and passes to the respective owner along with ownership of the property in question. The statutory tenant’s right of first refusal under Section 577 of the German Civil Code (BGB) is exclusively available to the current tenant and is not transferable.

How long does it take to review the municipal right of first refusal?

The municipality has two months from receipt of the notice from the notary to decide whether to exercise the right of first refusal. In practice, many municipalities in the Nuremberg metropolitan region issue the waiver within two to four weeks. However, in cases involving complex urban planning issues or when a committee review is required, the full time limit may be utilized.

What happens if the seller ignores the right of first refusal?

A sale made in violation of a real right of first refusal is legally invalid with respect to the entitled party-the buyer cannot be registered as the owner in the land registry. In the case of a contractual right of first refusal, the beneficiary may assert claims for damages against the seller. If the municipal right of first refusal is disregarded, the land registry office will refuse to transfer ownership, as the municipality’s waiver is missing.

Right of First Refusal and Urban Planning in Nuremberg

The City of Nuremberg holds extensive municipal rights of first refusal in certain urban areas pursuant to Sections 24-26 of the German Building Code (BauGB). In formally designated redevelopment areas (including parts of the Old Town, Gostenhof, and Röthenbach West), the right of first refusal is particularly active. Buyers of such properties must factor in that the purchase process can take several weeks until the city issues its waiver. In rare cases, the city actually exercises its right of first refusal-usually when a property is strategically important for municipal infrastructure, housing construction, or infill development.

For investors and buyers in Nuremberg: Before signing the purchase agreement, check with the Nuremberg City Planning Office or via the publicly accessible redevelopment area GIS to see if the property is located in a zone subject to the right of first refusal. Anyone who purchases a property in a redevelopment area without knowing this risks a delay or-in extreme cases-the municipality exercising its right of first refusal.

How does the tenant’s right of first refusal affect the sale of a condominium?

In practice, the tenant’s right of first refusal under Section 577 of the German Civil Code (BGB) significantly influences the sales process for converted condominiums. The tenant must be informed of the purchase agreement and is then given two months to decide. During this period, the contract remains provisionally effective. If the tenant exercises their right of first refusal and purchases the apartment, the contract with the original buyer is terminated. In Nuremberg, where many older rental buildings are being converted into condominiums, the tenant’s right of first refusal is a frequent issue in the sales process, which we carefully coordinate for our clients.

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