"Right of first refusal" is the provision contained in an instrument requiring the owner of the property to offer another person the first opportunity to purchase or lease the property.

The holder of the "right of first refusal" has no right to buy or lease the property unless and until the property owner offers the same for sale or lease to others or entertains an offer to purchase or lease the property from others.

The "right of first refusal" may also be granted in connection with any other form of alienation of the property other than a sale or a lease (mortgages, options to purchase, contracts for deed, etc.)

Recently, there has been a notable increase in the number of judicial decisions determining the invalidity of "rights of first refusal" provisions on the grounds of being either discriminatory or illegal restraints on the rights of alienation.

Any "right of first refusal," as shown by the public records as affecting the title of the land to be insured, must be made a matter of an appropriate title exception in Schedule B of title commitment must also contain a requirement in connection with the proper waivers or releases to be executed by those upon whom the right was granted.

Local laws in the states of California, Connecticut, New Jersey, and Virginia grant franchise service station dealers the first right of refusal to purchase their business when the station's franchisor attempts to sell the business. The District of Columbia had a similar provision, which lapsed, but has been reintroduced.

In general, these states’ statutes provide that a service station franchisor must make an offer to transfer, assign, or sell the franchise to the franchisee before selling the franchise to an independent party.

You must obtain approval from a Stewart Underwriter before issuing on a service station located in any of the above-referenced states.

Statutory Cites:

California: California Business and Professions Code Section 20999.25

Connecticut: CT Gen Stat Section 42-133mm

New Jersey: N.J. STAT. Section 56:10-6.1

Virginia: H.B. 1065 Virginia Petroleum Products Franchise Act; right of first refusal