The right of first refusal is a decisive mechanism in the Portuguese real estate and business market. When a right of first refusal exists, someone has priority to buy or contract before a third party.

This guide explains, in a practical way, who has the right of first refusal, how to exercise that right, the deadlines, mistakes to avoid, and communication models that work.

What is the right of first refusal?

The right of first refusal is the right to acquire property or enter into a contract with priority over third parties, when the owner of the property decides to sell or transfer it in lieu of payment. In Portugal, the right of first refusal can be legal (imposed by law) or conventional (agreed upon by the parties, as in a pre-emption agreement). In case of conflict, the legal right of first refusal prevails over the conventional right when they apply to the same thing.

The right of first refusal applies in very specific scenarios: co-owners when selling a share to a stranger, tenants in the sale of a leased property, owners of adjacent rural properties under certain conditions, and, in special situations, public entities in residential properties. Knowing when the right of first refusal exists and how to exercise it avoids challenges and lost opportunities.

Who has the right of first refusal by law?

The legal right of first refusal arises in several typical situations. Before listing them, it is important to note that exercising the right of first refusal always depends on an imminent sale for consideration and proper notification to the person entitled to the right.

• Co-owners: When a spouse intends to sell or transfer their share to a third party, the remaining spouses have a right of first refusal. As a rule, they take precedence over other legally entitled spouses.
• Urban tenants: Anyone who has been renting for more than two years has the right of first refusal in the purchase and sale or transfer of ownership of the rented property, with some exceptions. This right of first refusal may also arise in the signing of a new contract in case of expiry due to the landlord's termination of the lease.
• Owners of adjacent rural properties: When the area is smaller than the applicable minimum cultivation unit (or under special land consolidation schemes), neighbors have a right of first refusal in sales or transfers in lieu of payment to non-adjoining landowners.
• State, autonomous regions and municipalities: In certain sales of residential properties, the law grants public entities a right of first refusal, which must be coordinated with other preferential rights holders.
• Other cases: Preferential rights may exist in administrative easements, public spaces, protection zones, or territorial management instruments. When a specific rule exists, the preferential right prevails under the conditions stipulated therein.

If you are facing a transaction and suspect there is a right of first refusal, ask a professional for confirmation. Solicitor. The cost of a mistake could be the cancellation of the sale.

When does the right of first refusal not apply?

Not every transaction triggers a right of first refusal. As a rule, there is no right of first refusal in donations, pure exchanges without price, adjudications in partitions, or judicial sales with their own rules.

In matters of leasing, there are relevant exclusions when the building is under a horizontal property regime and the sale concerns autonomous units with certain requirements, or when the tenant fails to fulfill essential duties.

Time limits for exercising the right of first refusal.

In the right of first refusal, time is everything. The holder of the right of first refusal has a short period to decide and pay. In practical terms, the right of first refusal is exercised through a written declaration within the period indicated by the notifying party, never less than 8 days from the receipt of the communication, and with simultaneous payment or within the indicated period. Some special laws set their own deadlines; always check the communication letter. If the holder does not respond in time, the right of first refusal expires with respect to that transaction.

How to exercise the right of first refusal?

Exercising the right of first refusal is a formal process. To avoid invalidations, follow this practical sequence.

• Receive the communicationThe property owner must communicate in writing all the terms of the proposed transaction to the third party (price, conditions, deadlines, deposit, charges). Without essential elements, the period for the right of first refusal does not begin to run.
• Confirm legitimacy: Ensure that, in that case, you actually have a right of first refusal. For example, you are a co-owner, a tenant with more than two years' tenancy, or an owner whose land borders an area within the cultivated unit.
• Check priorities: When there are multiple preferential rights holders, there is an order of precedence. In many cases, the co-owner has first place. Public right of first refusal may also have legal priority.
• Declare the exercise: In a registered letter with acknowledgment of receipt, unequivocally declare that you are exercising your right of first refusal under the terms communicated. The right of first refusal requires full compliance with the notified conditions.
• Pay on time: Transfer the price or deposit exactly as indicated. Without timely and correct payment, the exercise of the right of first refusal fails.
• Formalize the deed: After validly exercising the right of first refusal, schedule the deed or final contract. If the seller refuses, you can request specific performance to have your right of first refusal recognized.

Essential documents and evidence

To support your claim for the right of first refusal, prepare the necessary documentation before responding.

• Title that confers the right: Property registration certificate, lease agreement, proof of co-ownership, or tax registration document.
• Communication received: Letter from the owner with all the terms of the sale. Keep the envelope and the return receipt, as they are proof that the period for exercising the right of first refusal has begun.
• Proof of requirements: For leases, demonstrate that the contract has lasted for more than two years; for rural properties, attach a plan and proof of the area and boundaries.
• Payment methods: Receipts, proof of transfer, deposit slip.

Mistakes that cause you to lose a right of first refusal.

Before presenting a list, it should be emphasized that small formal slips can be costly. Avoid the following errors:

1. Responding after the deadline: the right of first refusal is peremptory. One day's delay can be fatal.

2. Change conditions: Don't try to improve the deal. The right of first refusal is exercised by accepting exactly what was communicated.

3. Ignore charges: Mortgages, easements, and leases remain in effect. The right of first refusal does not eliminate existing encumbrances.

4. Neglecting priorities: If there are multiple preferential buyers, the sale may be annulled if the order of precedence is disregarded.

5. Lack of evidence: Without documents proving legitimacy, the exercise of the right of first refusal risks being deemed ineffective.

Right of first refusal in urban leases

The tenant's right of first refusal applies when the leased property is put up for sale or given in fulfillment of a previous obligation, provided the contract has been in effect for more than two years and the legal conditions are met. There are exceptions and special rules for properties in condominium ownership and for entire buildings. The tenant must be notified of all the terms of the transaction and may exercise the right of first refusal within the legal timeframe, paying the price and respecting the communicated conditions.

When negotiating a sale with a tenant, seek support from... Solicitors to calibrate deadlines and communications and avoid invalidations that could void the transaction.

Right of first refusal among co-owners

In co-ownership, the right of first refusal gives co-owners absolute priority when someone wants to sell their share to a third party. The seller must communicate the full terms of the transaction to the other co-owners. If the right of first refusal is exercised within the deadline and with payment, the share is awarded to the holders of the right of first refusal in proportion to their shares, if there are several. If the seller sells without respecting the right of first refusal, the sale can be annulled at the request of the holder of the right of first refusal.

Right of first refusal between adjoining landowners

In rural properties, the right of first refusal aims to promote land division and rational exploitation. When the law requires areas smaller than the minimum cultivation unit, the adjoining landowner has priority over non-adjoining landowners.

However, there are legislative and jurisprudential nuances that need to be evaluated in each case. In all situations, the titleholder must be notified and exercise their right of first refusal within the given timeframe, replicating the terms of the sale.

Public right of first refusal in residential properties

In certain contexts, the State, autonomous regions, and municipalities may have a right of first refusal on residential properties, and developers and owners must notify the seller in advance of the sale through the appropriate platforms. This right of first refusal coexists with private preferences and may alter deadlines and schedules for deed signing.

What if the right of first refusal is ignored?

If the owner sells to a third party without respecting a right of first refusal, the holder of the right of first refusal has means to react. They can file a lawsuit to have their right of first refusal recognized and obtain the adjudication of the property under the same conditions, or request the annulment of the sale. In urgent cases, they can request precautionary measures to stop the transfer or registration, preserving the usefulness of the right of first refusal.

Contractual clauses: the right of first refusal agreement

In addition to the legal right of first refusal, the parties may create a conventional right of first refusal through a pre-emption agreement. This agreement defines who may exercise the right of first refusal, under what conditions, and for how long. In case of conflict with a legal right of first refusal, the latter prevails. Drafting the agreement with a Solicitor It avoids ambiguities and future litigation.

Conclusion

The right of first refusal gives priority in the purchase, but it only protects those who act quickly and methodically. Identifying the type of right of first refusal applicable, respecting deadlines and formalities, and paying as communicated are essential steps.

Ignoring a right of first refusal can jeopardize a sale and lead to lengthy litigation. To structure communications, negotiate safely, and exercise your right of first refusal flawlessly, rely on a [legal professional/service provider/etc.]. Solicitor and with our lawyers in Braga.