Does a Right of First Refusal in Florida Require Separate Consideration?

Some Florida real estate contracts include “right of first refusal” (ROFR) clauses. This is where the owner of a property grants an option to another person, allowing them to either make the first offer when the property is sold, or alternatively to match any offer received from a third party. For example, a lease agreement might give the tenant a ROFR to purchase the leased premises should the owner decide to sell.

Florida Appeals Court Finds 16-Year Old Option Enforceable

Like any real estate contract, a ROFR requires consideration to be enforceable, typically the payment of money. But if the option is part of a larger agreement, does there need to be separate consideration for the ROFR? A Florida appeals court recently addressed that question.

The case before the court, Raj v. Sutherlin, involved a 2005 contract for the sale of a parcel of real property in Indian River County, Florida. The buyer in this case initially offered to purchase the property for $6.1 million. The seller rejected this initial offer. The two sides later agreed to a sales price of $6.4 million. The parties then executed a separate addendum where the seller granted the buyer a ROFR to purchase an adjacent parcel.

According to the buyer, there was never any separate consideration paid for the ROFR. He simply considered it to be part of the contract to purchase the initial parcel. But in 2021, the seller sold the adjacent parcel to a third-party without honoring the buyer’s ROFR.

The third-party buyer’s estate later sued the original buyer, seeking a judicial declaration that the ROFR was unenforceable. The buyer then filed a counterclaim against the third-party and the seller’s estate. A Florida circuit court judge ended up finding the buyer’s ROFR was unenforceable since it lacked separate consideration.

The Florida Fourth District Court of Appeal, however, said that was not a correct reading of the law. While it was true that a “contractual right of first refusal must be supported by consideration to be enforceable,” there was no requirement that such consideration “must be separately allocated.” Here, the addendum containing the ROFR incorporated the terms of the original sales contract. That meant the undivided sales price the buyer paid for the first parcel included payment for the ROFR to potentially buy the second parcel. Under these facts, the Fourth District said “no separate consideration would have been needed.”

Since the trial court improperly granted summary judgment to the seller and the third-party buyer, the Fourth District remanded the case for further proceedings.

Contact a Davie Real Estate Contract Dispute Lawyer

A contract represents a “meeting of the minds.” Unfortunately, the reality is that when it comes to real estate contracts, the buyer and seller may come away from a deal with different understandings of their rights and responsibilities. If you are involved in such a conflict and need to speak with a qualified Davie real estate contract dispute attorney, contact Valero Law today at 305-607-7011 to schedule a free consultation. We serve clients in Davie, Broward County, Coconut Grove and Miami-Dade County.

Source:

flcourts-media.flcourts.gov/content/download/2483359/opinion/Opinion_2024-3333.pdf