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HERE THE RIGHT OF FIRST REFUSAL IN THE ORIGINAL DEED DIVIDING THE PROPERTY INTO EIGHT PARTS WAS A VALID DEFENSE TO THE PARTITION ACTION; HOWEVER, IF DEEMED TO RUN WITH THE LAND, THE RIGHT OF FIRST REFUSAL VIOLATED THE RULE AGAINST PERPETUITIES (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the right of first refusal in the original deed which divided the property into eight parts was a valid defense to the partition action. However the right of first refusal could not be enforced because it violated the rule against perpetuities:

A right of first refusal . . . is a preemptive or contractual right to ‘receive an offer'” … . “[I]t is a restriction on the power of one party to sell without first making an offer of purchase to the other party upon the happening of a contingency” … . A reasonable, valid, and enforceable right of first refusal constitutes a good defense to a partition action … . However, with narrow exceptions not applicable here, rights of first refusal are subject to the rule against perpetuities and are thus invalid if it is possible for the future interests they represent to vest outside the prescribed time period (see EPTL 9-1.1[b] …).

Here, the 1966 deed demonstrates that the right of first refusal was for the benefit of the original grantees only … . Moreover, to the extent that the surrounding circumstances demonstrate an intent that the covenant should run with the land … , the restriction would violate the rule against perpetuities (see EPTL 9-1.1[b]…). Block 865 Lot 300, LLC v Baione, 2024 NY Slip Op 04189, Second Dept 8-14-24

Practice Point: A right of first refusal in a deed is a valid defense to a partition action.

Practice Point: Here the right of first refusal in the original deed applied only to the original grantees and, if deemed a covenant which runs with the land, it violated the rule against perpetuities.

 

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