Whether a contact buyer has standing to challenge the exercise of a right of first refusal (“ROFR”), and the status of the original purchase contract after the ROFR is exercised, were at issue in Acquisition Trust Company, LLC v. Laurel Pinebrook, LLC, 2d DCA Case No.: 2D18-4979 (Fla 2d DCA April 1, 2020).
Laurel’s lease of space within a commercial plaza to Publix included a ROFR to purchase the plaza. After Acquisition Trust provided a “non binding letter of intent” to Laurel with a purchase price and “key terms” Laurel provided notice of the letter to Publix. Thereafter, Laurel contracted to sell the shopping plaza to Acquisition Trust, subject to Publix’s RFOR. Publix provided notice to Laurel that it was exercising the ROFR “upon the same business terms and conditions contained in the letter of intent”. Laurel terminated the contract with Acquisition Trust based on Publix’ exercise of the ROFR. Laurel sold the plaza to Publix for the same price Acquisition Trust offered, but different due diligence and closing terms.
Acquisition Trust sued Laurel, Publix and Publix’s assignee seeking to rescind the sale alleging that their conduct was inequitable and fraudulent. The trial court granted Publix’s and Laurel’s motions for summary judgment.
The appellate court’s analysis began with the manner of exercising the RFOR. Quoting Castelli v. Castelli, 159 So. 3rd 271, 274 (Fla 4th DCA 2015), the exercise of a RFOR does not have to be “a point – by – point” recitation of the material terms of the third parties’ contract. Thus, Publix “simply notifying” Laurel of the exercise of its RFOR was sufficient, particularly as Publix’s notification did not seek to change the Acquisition Trust’s contract.
Rejecting the “inequitable” and “fraudulent” accusations, “once a right of first refusal is exercised, the owner and the lessee are free to modify the terms of the agreement and the third party does not have standing to object.” Specifically, once the ROFR is exercised, Acquisition Trust, as the contract buyer, had its contract right to the property “extinguished.” The selling owner, Laurel, and the holder of the ROFR, Publix, were free to modify their agreement.
A dissent focused on the ultimate contract that closed, arguing that because Publix’s terms did not match Acquisition Trust’s terms, the contract buyer had standing to challenge the closing.
Though associations exercising and ROFR are few and far between the handing of an ROFR can have significant consequences. The ability of the seller and ROFR holder to “change the deal” may open the potential of collusion; however, in the marketplace changing the deal should result in equivalent or better terms for the selling owner, recognizing that there normally would be little if any incentive for the selling owner to change the deal. The holding that a ROFR holder does not have standing may simplify the situation for the proverbial “last parties standing,” the selling owner and ROFR holder.
As a side note, the majority opinion discussed on an “association oldie”, Backus v. Smith, 364 So. 2nd 786 (Fla 1st DCA, 1978). Many community association practitioners have cited Backus for the holding that a contract purchaser lacks of standing to challenge a condominium association’s alleged failure to properly exercise a ROFR. The court here noted that Backus allowed the contract buyers standing against the seller based on particular pursuant to the terms of the original contract.
Many thanks to Mr. Christie for also timely providing the decision.
Michael J. Gelfand
Real Property, Probate and Trust Law Section
of The Florida Bar
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Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section
© 2020 Michael J. Gelfand
Michael J. Gelfand
Florida Bar Board Certified Real Estate Attorney
Florida Supreme Court Certified Mediator:
Civil Circuit Court & Civil County Court
Fellow, American College of Real Estate Attorneys
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