Lessee’s right of first refusal

Lessee’s right of first refusal "My family has been renting a house here in Metro Manila for almost 20 years. In fact, we still have a copy of the lease contract. The original owner sold it to Ms. A without first offering it to us. Ms. A offered to sell it again to us but for a higher price. Was the sale valid without first offering it to us? MelanieDear Melanie, We are under the impression that you are asking if your family enjoys the right of first refusal. The right of first refusal or the preferential right is a right which gives a party a right to have the first opportunity to either purchase or lease a property, or to enjoy a right. The right of first refusal is provided by contract or by law.In order to determine the existence of the right of first refusal, we need to examine the lease contract entered into between your family and the original owner. In Tanay Recreation vs. Fausto (GR 140182, April 12, 2005), the Supreme Court, speaking through former Associate Justice Alicia Austria-Martinez, explained: “When a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee has failed to accept it. The lessee has a right that the lessor’s first offer shall be in his favor. Petitioner’s right of first refusal is an integral and indivisible part of the contract of lease and is inseparable from the whole contract. The consideration for the lease includes the consideration for the right of first refusal and is built into the reciprocal obligations of the parties.”Further, in Morla vs. Belmonte (GR 171146, Dec. 7, 2011), penned by former chief justice Teresita Leonardo-de Castro, the Supreme Court held: “It is basic that a contract is the law between the parties. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Unless the stipulations in a contract are contrary to law, morals, good customs, public order or public policy, the same are binding as between the parties – x x x”The right of first refusal may also be provided by law. For instance, Section 6 of Presidential Decree (PD) 517, which provides that:“Within the Urban Zones legitimate tenants who have resided on the land for ten years or more who have built their homes on the land and residents who have legally occupied the lands by contract, continuously for the last ten years shall not be dispossessed of the land and shall be allowed the right of first refusal to purchase the same within a reasonable time and at reasonable prices, under terms and conditions to be determined by the Urban Zone Expropriation and Land Management Committee created by Section 8 of this Decree.”In order for the above provision to apply, it is required that the lessee/tenant built the house in the leased land. However, in your case, it is worthy to note that, before your family entered into lease contract, the house you rented was already built by the owner/lessor. Hence, PD 1517 does not apply in your situation. After you determine that right of first refusal exists in the lease contract, your family has the right to rescind the contract of sale within the period prescribed by law. In Tanay Recreation vs. Fausto case cited above, the Supreme Court further explained, that:“The rule is that a sale made in violation of a right of first refusal is valid. However, it may be rescinded, or, as in this case, may be the subject of an action for specific performance.” (Underscoring supplied)We hope that we were able to answer your queries. This advice is based solely on the facts you have narrated and our narration of the same. Our opinion may vary when other facts are changed or elaborated.Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net" - https://www.affordablecebu.com/