Question 1

What is a right of first refusal (zchut kdima) in Israeli property law?

Accepted Answer

A right of first refusal (zchut kdima) is the right to purchase a property before the owner offers it to any third party — or to match any offer the owner has received from a third party. It arises by statute in certain situations (co-ownership) and by contract in others. When a right holder is bypassed, they can apply to court to unwind the transaction.

Question 2

Who is entitled to a statutory right of first refusal in Israel?

Accepted Answer

Under the Land Law, co-owners (shutafim) of a property have a mutual right of first refusal. Before one co-owner sells their share to an outsider, they must first offer it to the other co-owners on the same terms. The right does not apply to transfers between family members or in certain other circumstances.

Question 3

How does a co-owner exercise their right of first refusal?

Accepted Answer

When a co-owner receives notice that another co-owner intends to sell to a third party, they must exercise their right within 30 days of receiving written notice of the intended sale and its terms. Failure to respond within 30 days is treated as a waiver. Adv. Elmaliach advises co-owners on both exercising and structuring the notice process.

Question 4

Can a right of first refusal be created by contract?

Accepted Answer

Yes. A contractual right of first refusal — commonly used in commercial real estate, family property arrangements, and joint ventures — can give one party the right to purchase before any third-party sale. Such rights must be carefully drafted to specify the trigger, the matching mechanism, and the time limits for exercise.

Question 5

What happens if a property is sold in breach of a right of first refusal?

Accepted Answer

A sale in breach of a right of first refusal can be challenged in court. Where the right is registered in Tabu, it binds third parties and the right holder can apply to have the transaction unwound. Where the right is only contractual and unregistered, the right holder may be limited to a damages claim against the seller.

Question 6

Does a right of first refusal affect property value?

Accepted Answer

Yes — a registered right of first refusal can reduce a property's attractiveness to buyers, since any sale is subject to the right holder's ability to match. In negotiations, the right holder's position can be leveraged to negotiate a purchase at the agreed third-party price, or to receive compensation in exchange for waiving the right.

Right of First Refusal in Israeli Real Estate

Statutory and Contractual Rights of First Refusal

Frequently Asked Questions

Right of First Refusal Issue?