Rights of first refusal have a significant impact on sales

When a plot of land is sold, it is not always the buyer with whom negotiations have taken place who ultimately decides. In Switzerland, contractual and statutory rights of first refusal can divert the transfer of ownership. For owners, developers and co-owners, this means that even the drafting of the contract becomes a source of risk.

Not every negotiated sale of land is ultimately completed with the intended buyer. As soon as a valid right of first refusal exists, the person entitled to it may step into the sale and take ownership themselves. In practice, this means that the real risk often lies not so much in the transfer of ownership, but rather in the structure of the contract and in whether a right has been correctly established and registered in the land register.

Under Swiss law, the effect varies significantly depending on the specific terms. A contractual right of first refusal may be triggered upon the sale of a property or in transactions of equivalent economic value. Unless otherwise agreed, the entitled party generally takes over the property on the terms negotiated with the third party. In the case of a limited right of first refusal, however, the price is fixed in advance. This difference is economically significant, particularly in family contexts, in cases of co-ownership or in long-term land development projects.

Formal errors can quickly prove costly
A limited right of first refusal requires public notarisation. An unlimited right, on the other hand, can be agreed in simple written form. However, a contractual right of first refusal only takes full effect vis-à-vis third parties once it has been registered as a preliminary entry in the land register. In transactions involving multiple parties, succession planning or project-related land reserves, it is therefore not only the will of the parties involved that matters, but also the formal safeguards in place.

Added to this is the time limit. Contractual rights of first refusal over land are, in principle, limited to a maximum of 25 years. This sets clear limits on the long-term safeguarding of access to land. Anyone wishing to secure development options over decades must take this time limit into account when structuring the arrangement. By law, the right of first refusal is also inheritable but not transferable, unless a permissible alternative arrangement is agreed.

Statutory rights remain a special case
In addition to contractual solutions, the law also recognises statutory pre-emption rights, for example in cases of co-ownership and in the relationship between the grantor and grantee of a building lease. Agricultural land law provides for further specific rights of access. Condominium owners, however, have no statutory right of first refusal. In such cases, such a right can only be created by contract. This is particularly relevant in practice, as condominium owners often mistakenly expect an automatic priority within the owners’ association.

For the property sector, this is more than just a legal footnote. Rights of first refusal influence exit strategies, pricing, bargaining power and deal certainty. Anyone selling, developing or investing in co-ownership structures must not only be aware of these rights but also incorporate them into the transaction structure at an early stage. Otherwise, a seemingly secure sale can quickly turn into a transfer of ownership to another party.