Legal Question in Real Estate Law in California
Right of First Refusal
I own a piece of commercial property. The property adjacent to me is owned by a national corporation. We are bound by a set of CC&R'S. The is a use restriction on my property for the other owner's benefit. There is a ''right of first refusal'' for my benefit should the other owner ''elect to sell or otherwise dispose'' of their property. I found out recently that their company, including this asset, was sold in a merger via stock transaction. Given the opportunity it was my desire to purchase the property and remove the deed restriction.
The question is: Does a stock transaction or merger of a company qualify as triggering event for my right of first refusal under the specific term or ''sell or otherwise dispose of the property''?
2 Answers from Attorneys
Re: Right of First Refusal
The answer is, you should contact my office. While they may dispute it, I believe you have good argument that it does. With the right attorney, you may be able to resolve the issue in your favor, as I will discuss with you.
Best,
Daniel Bakondi, Esq.
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Re: Right of First Refusal
I'm pretty sure Mr. Bakondi is wrong. The reasoning is as follows. Let's call the property-owning corporation XYZ Corp. Yesterday, 51% or 99% or even 100% of XYZ Corp. stock was owned by Mr. A. Today, Mr. A sold all his stock to Mrs. B.
This is a deal between Mr. A and Mrs. B. XYZ Corp. hasn't sold a thing. It is a bystander. Further, it still owns the property adjacent to you.
Also, it makes no difference if you substitute the names of other corporations for "Mr. A" and Mrs. B" in my example. The corporation has sold nothing. In addition, merging isn't "selling or otherwise disposing" of the property.
Of course, all this might be very different IF the right of first refusal just happens to be written to include a change of control over XYZ Corp. or its merger as a triggering event, and it's remotely possible something like that is in there, but I rather doubt it. Depends upon what the drafters anticipated and negotiated.
I assume your right of first refusal appears in the public record and identifies both parcels, yours and the corporation's, so as memories fade your right to acquire the parcel from the company into which XYZ was merged will be "of record," noticed and honored.
As a general rule, the law facilitates corporate mergers and acquisitions by allowing assignment, delegation, transfer, etc. of rights and duties fairly easy, usually automatic. Otherwise, mergers, especially by purchase of stock, would be unduly cumbersome.
I think your right of first refusal survives the merger, but is not triggered by it.
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