The right of repurchase and pre-emption in the contract of sale

Service

The right of repurchase and pre-emption are specific types of sale and are regulated in the Civil Code in Art. 593-602. Both are a privilege for the entity to whom the right was established, and enable him to purchase a specific thing before a third party. Repurchase and pre-emption rights most often apply to the sale of real estate (due to the greater economic importance and significance of the transaction), however, there is nothing to prevent these institutions from being used also for the sale of movables. But what are the differences between these rights?

Pre-emption right and the sales contract

In practice, the right of pre-emption is more frequent than the right to redeem. Pursuant to Art. 596 of the Civil Code may result both from the act and the content of the contract, and consists in the reservation of priority for one of the parties to purchase a designated item in the event that the other party sells the item to a third party.

In practice, this right is most often granted in the case of long-term rental or lease contracts, in which the owner of the property establishes for the lessee or lessee the pre-emptive right to buy the rented (leased) item if he wants to sell the item. The thing to which the pre-emption right relates may therefore be sold to a third party only on condition that the holder of the pre-emption right does not exercise his right. The obligated person (i.e. the seller of the goods) must remember that he is obliged to immediately notify the entitled person about the content of the sales contract concluded with a third party. This means that a contract may be concluded between the obligated (seller of goods) and a third party on condition - that is, with the proviso that it will come into effect, unless the holder of the right of pre-emption exercises this right.

Exercise of the right of pre-emption

The entitled person may exercise the pre-emptive right by submitting to the obligated person (i.e. the seller of the goods) a declaration on the exercise of this right. If the conclusion of a contract for the sale of goods to which the pre-emption right applies requires a special form, the declaration on the exercise of the pre-emption right should be submitted in the same form. This applies primarily to real estate pre-emptive rights. The exercise of the right of pre-emption is tantamount to concluding a contract between the seller of the goods and the rightful holder of pre-emption - the content of the contract is in principle the same as the contract concluded with a third party. According to Art. 600 of the Civil Code, by exercising the right of pre-emption, a contract of sale of the same content as the contract concluded with a third party is concluded between the obligated and the entitled party, unless a specific provision provides otherwise. However, the provisions of the contract with a third party, aimed at frustrating the right of first refusal, are ineffective against the rightholder. Moreover, if the contract of sale concluded with a third party provides for additional services that the holder of the pre-emptive would not be able to fulfill, he may exercise his right by paying the value of these benefits. However, when the right of pre-emption is vested in the State Treasury or a local government unit under the Act, such additional benefit shall be deemed not to be reserved.

The holder of the pre-emption right must remember about the deadlines. The right of pre-emption to real estate can be exercised within a month, and for other things - within a week of receipt of the notification of sale, unless other terms have been stipulated (e.g. in the original contract establishing the right of pre-emption).

In the event that the obligated (seller of goods), despite his obligation, concludes an unconditional contract with a third party (i.e. without the reservation that the contract will be concluded, unless the authorized person exercises his right), or fails to notify the authorized person about the sale or informs him of the essential provisions of the sales contract inconsistently with the reality - he will be liable for the resulting damage, but the contract will not be invalid. Therefore, it should be remembered that the impossibility of exercising the pre-emption right due to the conclusion of an unconditional sale agreement does not result in the expiry of the pre-emption right. However, the entitled person, under Art. 59 of the Civil Code, he may demand recognition that the sale is ineffective in relation to his rights, and thus that it did not transfer ownership to a third party.

However, if the right of pre-emption is granted by law to the State Treasury or a local government unit, co-owner or lessee, the sale is unconditionally invalid.

The pre-emption right is not limited by any statutory period. It is inalienable and indivisible. This means that it may not be disposed of by legal action (the entitled party may not, therefore, transfer his right to another person, e.g. by way of an agreement). However, this right is considered hereditary. The indivisibility of the right means that it cannot be exercised in parts (e.g. a pre-emption right to a collection can only be exercised in its entirety - the entitled party cannot demand the purchase of only half).

The contract of sale and the right of repurchase

The right of repurchase is a stipulation in the sales contract that allows the seller to recover the sold item against the reimbursement of the price and selling costs and with the reimbursement of expenses. This right may be reserved for a period not exceeding five years (the longer period is shortened).

The right of repurchase is exercised through a unilateral declaration by the seller to the buyer. This means that the buyer has no right to refuse to return the purchased item. It should be remembered that if the conclusion of the sale contract required a special form, the declaration on the exercise of the repurchase right should be submitted in the same form (e.g. in the case of the sale of real estate, a notarial deed was necessary, so the declaration on the exercise of the repurchase right also requires the form of a notarial deed) .

In connection with the above, the obligated (buyer) may not dispose of the item encumbered with the right to repurchase or burden it with a right that would be effective against the rightholder (seller). Should that be the case, the buyer would be required to restore the original condition in order for the seller to exercise his entitlement. Otherwise, it will be liable for default on general terms.

As a rule, the entitled person who exercises the right to repurchase should pay the debtor the amount for which the item was originally sold, as well as the expenditure incurred by the debtor (however, the reimbursement of expenditure that did not constitute necessary expenditure should be paid to the buyer only within the limits of the existing increase in value stuff). However, the parties may in the contract of sale independently set the repurchase price - in terms of amount or by specifying the method of its calculation. However, if the repurchase price specified in the contract of sale exceeds the price and selling costs, the seller may demand a reduction of the agreed repurchase price to the value of the item at the time of exercising the repurchase right, but not lower than the sum calculated in the above-mentioned way - this is to protect the seller against the unprofitability of the repurchase of goods (price reduction may not therefore exceed the sum of the price paid by the buyer, selling costs and reimbursement of expenditure). However, if the value of the item turns out to be higher than the agreed repurchase price, the obligated party is not entitled to demand to change this price.

The right to repurchase is inalienable and indivisible. This means that this right cannot be transferred by legal action (because it is to serve the seller's personal interests) and it cannot be exercised for some things. As a rule, however, it is assumed that this right is inheritable. Furthermore, if there are several rightholders and some of them do not exercise their right, others may exercise them in full (this means that there is no obligation for all rightholders to be interested in exercising their right - if this happens, only some may claim your powers).