What Is the Right of Pre-emption in Real Estate?

The right of pre-emption is a legal right that gives a specific person or body priority to purchase a property, ahead of all other candidate buyers and at the same price and under the same conditions. That right can arise from legislation (for example for public authorities or social housing companies) or from a contract between private parties, such as a tenant and a landlord.

What exactly is the right of pre-emption?

The right of pre-emption gives the beneficiary the ability to buy a house, apartment, plot of land or other property first, as soon as the owner wishes to sell. The holder of the right may purchase the property at the same price and under the same conditions as another candidate buyer with whom the owner has reached an agreement. It is therefore a priority right to buy - not an obligation to buy.

Who can hold a right of pre-emption?

A right of pre-emption may be granted to various parties, depending on the situation:

• Public authorities and public bodies, such as municipalities, regions or housing companies, for example in specific zones or in the context of spatial planning and housing policy.
• Social housing companies, in order to acquire certain properties or plots with priority.
• Private individuals, such as tenants, co-owners or other contractual partners, when this is expressly stipulated in an agreement.

In Belgium, legislation and regional decrees define the areas and situations in which certain bodies may exercise a statutory right of pre-emption. The rules differ depending on the region - Flanders, Wallonia and Brussels each have their own framework.

Statutory vs. contractual right of pre-emption

A distinction is generally made between two types of pre-emption rights:

• Statutory (legislative) right of pre-emption
  This is provided for by law or decree. Certain public authorities or bodies automatically receive a right of pre-emption in designated zones, for example to protect nature, to deliver social housing or to guide spatial planning.
• Contractual (conventional) right of pre-emption
  This arises from an agreement between parties, for example when a tenant agrees with the owner that they may buy the property first as soon as the owner wishes to sell. The duration and conditions are then determined contractually.

In both cases, the right of pre-emption gives the beneficiary the opportunity to buy the property before the sale to another buyer becomes final.

What does this mean for the seller?

If a right of pre-emption applies to your property, you can still sell, but you must first offer the property to the holder of the pre-emption right. In practice, the process typically works as follows:

• You receive an offer from a candidate buyer and reach an agreement on price and conditions.
• The notary or seller must formally submit this offer and these conditions to the beneficiary of the pre-emption right.
• The beneficiary has a statutory or contractual period in which to decide whether to exercise the right.
• If they exercise the right, the seller must sell to that party under the same price and conditions, instead of to the original buyer.

If you as an owner disregard an existing pre-emption right, you risk legal complications or damages claims from the beneficiary.

What does this mean for the buyer?

For an ordinary buyer, a right of pre-emption means that the purchase is not fully certain for as long as the pre-emption period is running. You can sign a preliminary sale agreement, but:

• the sale is usually subject to the suspensive condition that the pre-emption right is not exercised;
• if the beneficiary does exercise the right, you lose the property, despite the earlier agreement reached;
• you must allow for an additional waiting period, because it must first be established whether anyone wishes to use their priority right.

It is therefore important to find out in advance whether the property you wish to buy is subject to a pre-emption right and what deadlines apply.

How does the procedure work in broad terms?

The specific steps can vary from case to case, but the process generally runs as follows:

1. The buyer and seller reach an agreement and sign a sale agreement, often including a clause regarding the pre-emption right.
2. The notary investigates whether any pre-emption rights apply to the property and who the beneficiaries are.
3. If applicable, the notary offers the property to the holder(s) of the pre-emption right, specifying the price and conditions.
4. The beneficiary has a fixed period to decide whether to exercise their right.
   • If they do not (or fail to respond within the deadline), the sale to the original buyer can proceed.
   • If they do exercise the right, they step into the shoes of the original buyer and the sale is concluded with them.

Difference between right of pre-emption and right of first refusal

In practice, the right of pre-emption and the right of first refusal are sometimes confused, but there is an important legal distinction:

• With a right of first refusal, the owner must first negotiate with the beneficiary when they wish to sell, but there is not yet an existing sale agreement with another buyer.
• With a right of pre-emption, there is already a sale agreement with a candidate buyer, but the beneficiary may "take over" that agreement by purchasing the property at the same price and under the same conditions.

As a buyer, the right of pre-emption is the one that matters most, because it is the right that can effectively see another party step in ahead of you.

What should you watch out for as a buyer or seller?

• Always check with a notary or estate agent whether any pre-emption rights apply to the property.
• Make sure the preliminary sale agreement contains clear clauses regarding any pre-emption rights and their consequences.
• As a buyer, allow for a possible waiting period and the risk of losing the property if the right is exercised.
• If in doubt, seek advice from a notary, who is legally required to check these rights and to follow the correct procedure.