Corroboration dispute raises the aim of the right of first refusal in the context of third parties

August 25, 2025

During examination of a corroboration claim, the matter of rights on WIDEN client as a purchaser in a situation of the purchaser’s rights protection when the purchaser’s member of the board, shareholder and beneficial owner who is also the joint owner of the property responds to the use of the right of first refusal. 

WIDEN Latvia client purchased undivided shares of the property and made full purchase fee payment under the concluded purchase agreement; however, the client’s purchase rights to the undivided shares of the property were not corroborated in the land register because the seller considers that the joint owner of the property has used its right of first refusal.

Referring to the institute of the above rights, the purchaser’s member of the board, shareholder and beneficial owner who also signed the property alienation agreement on behalf of the legal entity as a natural person who is a joint owner attempted to exclude the WIDEN Latvia client as a third party in order to become a party to a concluded purchase agreement – a buyer – not considering it as a duty to inform the third party. 

Sections 2061 and 2062 of the Civil Law provide for the right of a third party to be informed on its exclusion from the transaction.

WIDEN Latvia implemented the client’s representation in three court instances achieving in court the application of the institute of the right of first refusal in line with the spirit of the law, i.e., without infringing on the right of the third party – a purchaser – in the circumstances established in the case.

When refusing to initiate the cassation proceedings, the Senate agreed to the conclusion of the appellate court that three parties were involved in the implementation process of the right of first refusal: the seller, the purchaser, and the person with the right of first refusal. Thus, the purchaser should have the right to receive information on the use of the right of first refusal, and non-compliance with it may not cause the legal consequences favourable to the seller and the person with the right of first refusal.

At the same time, the Senate accepted such interpretation of legal provisions that provides that the joint owner is entitled to use the right of first refusal within two months since the date of receipt of a copy of the purchase agreement; however, the purchaser should also be informed on the use of the right of first refusal.

In relation to the form of “application” under Section 1073 of the Civil Law, the Senate agreed to the reasoning of the appellate court that application should take place by an active act or at least such act from which the existence of intention can be clearly concluded. Namely, the purchaser should also be informed in the case of the use of the right of first refusal, if the person with the right of refusal wishes to enter into the buyer’s place; however, it should be done with an active act.

Therefore, the appellate court did not permit creation of such a case law where the simultaneous use of the right of the joint owner and at the same time the seller as a representative of the legal entity, shareholder and the beneficial owner to use the institute of the right of first refusal is used as a formal cover to hinder the execution of transaction.

The above litigation marks how important it is to apply the provisions of the Civil Law not only according to the letter of the law but considering also the spirit of the law without allowing such interpretation of Sections 1073, 2061, and 2062 of the Civil Law that would not regulate the right of the third party (purchaser) to be informed when the person with the right of first refusal uses its rights under the law.

The court has found the most just and expedient settlement of the dispute in the examined case, inter alia, by excluding the possibility that the institute of the right of first refusal is used as a tool to avoid from execution of obligations taken under the purchase agreement.