Party That Fails to Close on Purchase Cannot Later Enforce Right of First Refusal

On July 15, 2019, Justice Schecter of the New York County Commercial Division issued a decision in Vahdat v. Capdel LLC, 2019 NY Slip Op. 32028(U), holding that a party that failed to close on a purchase could not later seek to enforce its right of first refusal, explaining:

Plaintiff already exercised his right of first refusal on the Property and then breached by failing to close. Therefore, he can no longer prevent Capdel from selling the Property. If the law were otherwise, then a holder of a right of first refusal could tie up the property for years and years. He would just need to keep exercising the right, default over and over again, and keep repeating that cycle. Meanwhile, the owner of the property would be stuck and have no recourse to sell the property to anyone else.

Significantly, plaintiff has cited no law to the contrary and there is no legal support whatsoever for his meritless opposition. Plaintiff contends that he never previously exercised his right of first refusal because it was SAG that did so in 2017. The Agreement, however, makes clear that the right belongs to plaintiff and any assignee formed by him. The parties' emails from 2017, moreover, conclusively prove that plaintiff exercised his right of first refusal and chose to contract through SAG. Nor is there any authority for plaintiffs unsupported belief that he or his affiliates can continuously exercise the right after invoking it once and then defaulting.

(Internal quotations and citations omitted).

We frequently litigate disputes over the purchase and sale of commercial property. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you are involved in a dispute regarding a commercial real estate transaction.