You don’t need separate consideration for a lease right of first refusal to be enforceable.  That’s the lesson of Adams Outdoor Advertising v Todd Tarr and Shirley Buchner. Here are the facts.

• Adams Outdoor Advertising and Shirley Buchner executed a billboard lease in 2008 that contained a right of first refusal for the benefit of Adams.

• In 2017 Buchner listed the property for sale.  She approached Adams and asked if it wanted to buy the property for $79,900.  Adams said that it “is interested in purchasing the parcel where the billboard resides but is not interested in the parcel that houses the building.” Adams offered $10,000 to buy an easement around the billboard.  Buchner declined.

• In 2018 Buchner sold the property to Todd Tarr for $50,000.  Buchner did not give Adams notice of the $50,000 offer from Tarr.

• Adams filed a breach of contract lawsuit against Buchner for failing to provide written notice of the offer.  Buchner filed a motion saying that because Adams had waived the right of first refusal by saying it was not interested in buying the property and that the first of first refusal was unenforceable and invalid for lack of separate consideration.

• A trial court and State of Michigan Court ruled in favor of Adams.  They argued that there was no record that Adams was waiving its first right of refusal of an offer from a third party at a lower price and that the lease itself was consideration enough: “…this 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…there is no dispute that plaintiff paid annual rent to defendant for the billboard.  Therefore the lease, and by extension the right of first refusal, was supported by consideration.”

Billboard Insider’s take: You should be extra careful communicating with landlords concerning a right of first refusal.  Adams won here, but it might have avoided a legal fight if they had included in its written response to the landlord’s offer language: “nothing in this letter waives our right to be notified and to exercise the first right of refusal if you receive a written offer from a third party.”

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