Define: Right Of Preemption

The right of pre-emption, also known as the right of first refusal, is a legal concept that grants a person or entity the opportunity to purchase a property or asset before it is offered to others. This right allows the holder to match the terms of a proposed sale or transaction and acquire the property or asset on the same terms as a third-party offer. The purpose of the right of pre-emption is to protect the interests of the holder by providing them with the opportunity to acquire the property or asset if they wish to do so. This right may be established through contractual agreements, statutes, or common law principles and can apply to various types of transactions, such as real estate sales, business transfers, or lease agreements.

This is the right to be given the first opportunity to buy an interest in land, if the prospective seller decides to sell. Typically such a right would be contained in a contract and, like any other contract, must be supported by consideration. Unlike an option to purchase, a right of preemption (‘right of first refusal’) cannot compel the proprietor to sell. Consequently, there is some doubt about whether it is, in itself, an interest in land. This is an important issue, because if it is not an interest in land, it cannot be protected by the entry of a notice against the registered title. This means that if the person who granted the right of preemption then sells the land to someone else in contravention of that right, the right is lost. The balance of authority until 2002 was that a right of preemption did not create an interest in land.

s.115 of the LRA 2002 states that a right of preemption may be enforceable against successors in title, from the moment of its creation, provided that its priority is protected in the usual ways. Whether this makes it an interest in land or not is still unclear, the practical question whether it can be protected on the register is now answered in the affirmative.

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 29th March 2024.