Many out of home leases have a clause allowing the out of home company the right of first refusal to purchase property if it is listed for sale.  Will a right of first refusal hold up in court?  Yes, according to Adams Outdoor versus Todd Tarr and Shirley Buchner.  Here are the facts.

• In 2008 Adams Outdoor and Shirley Buchner executed a billboard lease.  The lease required Buchner to give Adams a first right of refusal to purchase the property if it was put for sale and to provide written notice of any third party offers to purchase the property.
• In 2017 the property was listed for sale.  Adams was offered the property at $79,900.  It declined and offered to purchase an easement under the billboard for $10,000 but the easement offer was declined.
• In 2018 Buchner accepted an offer of $50,000 for the property but did not give Adams written notice.
• Adams sued for breach of contract claiming that Buchner had failed to provide written notice.  Buchner countered that (1) Adams actions had implied a waiver of first right of refusal to purchase the property and (2) that the first right of refusal provision was unenforceable because not accompanied by consideration.
• A lower court and Michigan court of appeals ruled in favor of Adams.  The court found
  • (1) Adams conduct did not constitute a first right of refusal: “It is true, as defendant argues, that plaintiff’s communications and conduct indicate that it was not interested in purchasing the property and that it was more interested in the billboard and area surrounding it.  However, the emails involved not an offer from a third party, but an offer from defendant herself and at a specific price.  The first right of refusal was never discussed or mentioned…There was no indication that plaintiff would never purchase the property or that it was waiving its first right of refusal to an offer from a third party and at a significantly lower price, e.g. $50,000.”
  • (2) The lease itself was adequate consideration for the first right of refusal: “...the Court has explicitly held that a right of first refusal need not be supported by separate consideration; if the lease itself is supported by consideration, this is sufficient.”

Insider’s take:  A first right of refusal will hold up in court but you may be able to avoid entering court by being very clear about when your are and are not waiving the right of first refusal if a landlord approaches you about buying land on which your billboard sits.

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