Contract To Buy/tenant Has 1st Right To Purchase?

I have the house under contract to buy before Oct 10.
Seller has a tenant with a lease through Dec. 31.
There is a clause in the lease that says
"At any time during the lease the parties may mutually decide to enter into a lease purchase agreement. Terms of that agreement will be negotiated at the appropriate time. At the end of this agreement tenant will have right of first refusal on the purchase of the property as mentioned if the property is listed for sale"
The contract I have with the seller is at a tremendous discount on the value.
I want to be sure not to have any trouble.
Any input would be much appreciated.
Paul

Comments(2)

  • bgrossnickle26th August, 2004

    1) the seller is not mutually agreeing to a L/O

    2) was the property listed in the MLS for sale? You are buying it before the end fo the lease agreement.

  • commercialking26th August, 2004

    Who wrote that lease? If your excerpts are all there is to these provisions I think you should nominate this for some sort of prize for worst legal writing.

    "At any time during the lease the parties may mutually decide to enter into a lease purchase agreement. Terms of that agreement will be negotiated at the appropriate time."

    Whatever this is supposed to mean it probably means nothing and is not binding. In essence an agreement to come to an agreement at some later date lacks sufficient specificity to be enforcable.

    "At the end of this agreement tenant will have right of first refusal on the purchase of the property as mentioned if the property is listed for sale"

    Well this one at least has some words that have some legal meaning. But here too it is very hard to construe what the agreement is about. A "right of first refusal" normally means the right to match price and terms of any offer that were to come in on the property during the specified period. Unfortunately this sentence is very confusing about what that period means. Does "at the end of this agreement" mean "during the period of this lease"? or does it mean "begining when this lease terminates"? If the later meaning (which is what the words seem to say) then when does the right of first refusal end? Ever? Or does this phrase mean, "for some reasonable period after Dec. 31?" Unless there is more of this agreement than you are quoting I would say the thing is so vauge and contradictory as to be meaningless. On the other hand, if I were the judge, I might just conclude that the parties ment it to mean something. In that case i'd probably fall back on the one clear concept, there is a right of first refusal and the tenant has the right to match your offer to the seller.

    That said, if I were in your shoes, I'd go to the tenant and ask him what he thought he was agreeing to here. If he thinks he has a right of first refusal I'd ask him if he has the wherewithal to exercise that right i.e. can he get financing? Then I would ask whether he thinks his right expires on Dec. 31 or at some later date. In the best of all possible worlds he'll turn out to be a reasonable person who cannot get financing and will waive his right of first refusal in writing. (Don't let whoever drafted this lease provision draft the release).

    Short of that it looks like you just negotiated a really good deal for the tenant. He has a right of first refusal and can step into your shoes on your "tremendous discount" deal.

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