Expert: Dennis Herman - 10/12/2008

Question
Mr. Herman,
My partner and I own a tavern in Wisconsin, that was given to me by my parents. We ran the tavern ourselves for a while and then we leased it out. We have a commercial lease agreement. May 2008 we sold the tavern. When we sold the tavern, we sold it "as is" to the new owner with the commercial lease agreement traveling intact with the sale. In that lease agreement, the tenant had "first right of refusal" which we felt he had exercised when he gave us an offer on the property and we rejected in June of 2007. Long story short, the tenant moved out early because of a disagreement with the new owner and the new owner is refusing to give him his deposit back because of specific damages to the property. We received a letter from a lawyer for the former tenant saying that he is suing us for the deposit amount and that according to the lease agreement, we never notified him of the sale so he could exercise his first right of refusal and that the sale of the property is not legal. We did not notify him in writing but we did notify him verbally. Truthfully we found a buyer for the property because the tenant, verbally, told us he could not afford the upcoming rent increase. I flew from Tucson Arizona, where I now live, to Wisconsin to execute the sale. Before the transaction was completed I had a meeting with the tenant and introduced him to the new owner, as the new owner, at the property.
Here is my questions: If the tenant paid the new owner rent, isn't that in fact acknowledgement on his part that there is a new owner and he agrees to that? Or: If he paid the new owner the rent and did not at the time of the sale exercise his first right of refusal, is that right of refusal still an issue? Or: If he paid the new owner rent and did not pay it to us, didn't he breach the contract by non payment of rents to us directly anyway if indeed he is not acknowledging the sale? The tenant moved out two months before the end of the lease agreement. I think this is all because he wants his deposit back but He still owes the last two months rent he didn't pay which is the same amount as the deposit. If you can not answer my questions, can you tell me where you are located in Wisconsin so I may hire you to help me with this issue? Thank you for your time and thank you in advance for your help with this matter.
Mary

Answer
My first question would be, did you get the right of first refusal in writing?  The old saying in real estate goes, "always reduce everything to writing."  This is the type of question that needs to be brought to an attorney.  If you need a good real estate attorney I can forward you one.  You can contact me directly through my web site:  Ez1Realty.net and I will forward his contact information.  I am in Menomonee Falls and I work in Milwaukee, Waukesha and Washington counties.

Here is a copy of the law referring to first refusal with a comment from the NAR web site on the subject at the bottom.

RL 24.12 (2) As used in this subsection, " of first refusal" means the right of a
person to have the first opportunity to purchase or lease real property. " of first refusal"
does not mean a so-called " clause" which is a contingency provision in a purchase
agreement that requires the prospective buyer to remove certain contingencies in the buyer'
purchase agreement or to relinquish the buyer' primary status to a secondary offer. If a licensee
is providing brokerage services in a transaction and the licensee has knowledge that the property
is subject to a right of first refusal, the licensee shall disclose the right of first refusal, in writing
and in a timely manner, to all persons seeking to acquire an interest subject to the right of first
refusal. After disclosure of the right of first refusal to a party seeking to acquire an interest in the
property, the licensee may deliver a copy of that party' subsequent offer to purchase, exchange
agreement, option contract or lease proposal to the party holding the right of first refusal.

If the agent is unsure as to whether or not the buyer has a right of first refusal the agent should consult an attorney.

Sorry for the delay but it took me a while to find the law on the Internet.