South-Western Legal Studies in Business

Transfer of Ownership of Property from Corporation to Sole Owner of That Corporation Is Not a Sale
Description The lease of commercial property contained a right of first refusal for the tenant to have the option to buy the premises at a price offered by a third party during the lease. When the owner of a corporation that owned the property transferred the property to himself personally, there was no sale that triggered the right of first refusal.
Topic Real and Personal Property
Key Words Lease; Right of First Refusal; Sale
C A S E   S U M M A R Y
Facts My Mouna, Inc. leased commercial property to Lehn’s Court Management, LLC, for five years. The lease gave Lehn’s a right of first refusal to buy the property during the term of the lease in the event My Mouna received an offer from a buyer for the property. Two years into the lease, My Mouna transferred ownership of the property to Georges Moussa for $60,000. Moussa owns 100% of My Mouna. Lehn’s sued, contending that My Mouna failed to give Lehn’s notice of a possible sale and the right to exercise its right of first refusal. The trial court dismissed the case, holding that the transfer of the property from the company to its owner was not a sale as contemplated in the lease. Lehn’s appealed.

Affirmed. Under a right of first refusal, if a landlord receives an offer from a third party for his land and decides to sell, the landlord must first offer the property to the tenant; the terms of the landlord’s offer to the tenant are identical to those contained in the third party’s offer. The tenant may accept or reject that offer. However, the transfer of a commercial landlord’s interest in property from a corporation owned by the landlord to the landlord personally is not a sale that triggers tie right of first refusal. The landlord is not a third party to the lease, so no third party gained control over the leased property.

Citation Lehn’s Court Management, LLC v. My Mouna, Inc., --- A.2d --- (2003 WL 22707890, Super. Ct., Pa., 2003)

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