The right of pre-emptive acquisition, as its name suggests, is a right that grants its holder the power to acquire an asset, whether movable or immovable, in preference to any other interested third party.
Within this right we find the right of first refusal and the right of pre-emption, which will be explained below.
The right of pre-emptive acquisition is a real right, i.e. it allows the holder to obtain advantages and to have power over a certain thing in relation to third parties. The Law on Urban Leases (LAU), in its Article 25, refers to this same right in the case of real estate.
Article 25 from the Law on Urban Leases :“1. In the event of the sale of the rented property, the lessee shall have the right of preferential acquisition of the same, under the conditions set out in the following paragraphs.
2. The lessee may exercise a right of first refusal over the leased property within a period of thirty calendar days from the day following the date on which he/she is notified in a reliable manner of the decision to sell the leased property, the price and the other essential conditions of the transfer…”
Characteristics of the right of pre-emptive acquisition
The characteristics of this type of right in rem are as follows:
- In order for the right of pre-emptive acquisition to be exercised, there must be a prior express agreement between the parties, or a regulation must establish such a right.
- The owner of the right of pre-emptive acquisition may address both the owner of the property in question and third parties who have already acquired the property.
- It limits the owner’s freedom (Ius Disponendi), as it limits the owner’s ability to sell.
- The assets subject to this right can be immovable (homes, premises) or movable (shares in a company).
Types of pre-emptive acquisition right
Once we have understood what the right of pre-emptive acquisition is, let us move on to the different types:
Right of first refusal
This gives the “tantee”, the holder of the right, the right to acquire ownership of another person’s property before another person, by paying the price that the latter would assume. The “tanteante” pays the right of first refusal with the same price and conditions as those faced by the third party.
This right has the following requirements:
- There must be an express agreement between the parties or a regulation must establish this right.
- The owner of the property may ask the bidder to pay a certain price for this right of pre-emption.
- Time limit: the grantor must exercise his right within a certain period of time from the time the third party wishes to acquire the property that is the object of the right.
- Once the property has been sold to a third party, the party who has not exercised his right may not request the acquisition and has therefore lost his right.
- This type of right is common in the sale and purchase of leased property, where the bidder is the lessee of the property; the owner of the property has to offer the property to the lessee on the same conditions as he would offer it to interested third parties.
An example of the application of this right is the Supreme Court ruling of 25 March 2004.
Right of withdrawal
The right of withdrawal is simply the right to recover the thing sold; that is to say, the seller of the good has the right to recover the good once it has been sold.
Like the right of first refusal, there must be an agreement between the parties, or a regulation must establish such a right, and there must be a time limit for exercising the right.
The Civil Code differentiates between conventional withdrawal (arts. 1507 to 1520) and legal withdrawal (arts. 1521 to 1525). On the one hand, the conventional right of withdrawal is the right of the seller to recover the thing sold, while the legal right of withdrawal is the right to subrogate himself, with the same conditions stipulated in the contract, in place of the person who acquires a thing by purchase or dation in payment.
Article 1507 of the Civil Code: “Conventional right of repossession takes place when the seller reserves the right to take back the thing sold, with the obligation to comply with the provisions of Article 1518 and the rest of what has been agreed”.
Article 1521 of the Civil Code: “The legal right of pre-emption is the right to subrogate oneself, under the same conditions stipulated in the contract, in place of the person who acquires a thing by purchase or in lieu of payment”.
The right of first refusal exercised by the administration.
Another of the modalities of this right of first refusal is the possibility of being exercised by the public administration.
The administration reserves the right to exercise this right on certain transfers of real estate, for example, on social housing.
The purpose of this right on the part of the administration is usually to:
- To ensure that the planning programme is complied with.
- To increase municipal land assets.
- To intervene in the real estate market.
- To facilitate the fulfilment of the objectives of the planning.
Faced with this interventionism on the part of the Administration, a multitude of legal proceedings have been brought alleging a possible infringement of the property rights of the owners of these properties.
These controversies have been resolved by our Constitutional Court in its ruling 154/2015 dated 9 July 2015 establishes:
“The subjection of the owner of protected housing to preferential acquisition rights clearly responds to a purpose of general interest: access to decent housing for people in need. The limitation contributes to this objective because it serves to prevent fraud in transactions (the collection of “black” overprices) and the generation of publicly-owned subsidised housing stock.
The aforementioned limitation is thus supported by reasons that, moreover, are particularly powerful as they are linked to a constitutional pillar: the commitment of the public authorities to promote the conditions that ensure the effectiveness of integration in social life (article 9 of the Spanish Constitution), in general, and access to decent housing (article 47 of the Spanish Constitution), in particular. It also connects with the constitutional mandate of social and economic protection of the family (Article 39.1 Spanish Constitution), youth (Article 48 Spanish Constitution), the elderly (Article 50 Spanish Constitution), persons with disabilities (Article 49 Spanish Constitution) and returned emigrants (Article 42 Spanish Constitution)”.
“Subjection to the exercise of the right of first refusal does not affect the right to transfer; it only affects the right to choose the acquirer. In turn, such limitation only affects inter vivos transfers, not mortis causa transfers. Moreover, the inter vivos transfers to which it refers are the second and successive ones and only during the period of validity of the legal protection regime”.
Should you require further information on the types of preferential acquisition, please do not hesitate to contact us.