In the Spotlight: Outparcels and Rights of First Refusal

Whether we are representing our clients in connection with drafting a right of first refusal or assisting them in exercising such a right, those rights of first refusal involving an outparcel deserve special consideration when the grantor of the right owns additional property. An example is when the grantor owns the shopping center of which the outparcel is only a part. Specifically, is the outparcel tenant's right of first refusal triggered when the owner receives an offer to purchase the entire shopping center, including the outparcel? If the right of first refusal is triggered, must the tenant exercise the purchase right as to the entire center, or may it carve out and purchase the outparcel only? Whether intentionally or unintentionally, the express language of most rights of first refusal do not directly address these questions, often leaving the courts to determine what effect, if any, this “package deal” has on the exercise of the right of first refusal. This article focuses on the different approaches taken by the courts to enforce rights of first refusal involving the package deal, and offers drafting suggestions to better address the parties' expectations.