What is an option and a right of first refusal over property?
Is an option or right of first refusal over property enforceable in South Africa?
“In the event that a seller concludes a contract of sale with a third party in breach of a right of pre-emption, the [holder of the right of pre-emption] may, through a unilateral declaration of intent, step into the position of the third party. A contract of sale is then deemed to have been between the seller and the holder of the right of pre-emption.”
“[N]either in terms of section 1(1) of [the Formalities Act] nor in terms of section 2(1) of [the Alienation of Land Act] does a right of pre-emption in respect of land have to be in writing in order to be valid … [A] right of pre-emption gives the pre-emptor no right to claim transfer of land; it merely gives him a right to enter into an agreement of sale with the grantor should the latter wish to sell.”
“No alienation of land after the commencement of this section shall, subject to the provisions of section 28, be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority.”
When you need a Option & Right of First Refusal
- A tenant wants the right to buy the leased premises later — either a firm option to purchase at a set price, or a right of first refusal so the landlord must offer the property to them before selling to anyone else.
- A buyer or investor wants to "lock in" a property while doing due diligence, arranging finance, obtaining rezoning or waiting for a condition to be met, and pays for an option that keeps the seller’s offer open and irrevocable for a fixed period.
- A developer, neighbour or co-owner wants a pre-emptive right over adjoining or jointly held land so they get the first chance to acquire it if the owner ever decides to sell.
- Business partners, shareholders or joint-venture parties want to control who can end up owning a key property, by giving each other a right of first refusal before any outside sale.
What a Option & Right of First Refusal should contain
Grant and nature of the right (option vs pre-emption)
States unambiguously whether the right is a firm option to purchase (an irrevocable offer the holder can accept to create a binding sale) or a right of first refusal/pre-emption (the owner must offer first only if they decide to sell). The two have different legal effects and formalities, so the clause must say which one it is — vague "first option" wording invites a dispute.
Property, price and essential sale terms
Identifies the property and fixes the price (or a clear price mechanism) and the core sale terms. For a property option this is critical: because acceptance creates a land sale, the option must satisfy the Alienation of Land Act and contain everything a valid deed of sale needs — parties, property and a determined or determinable price.
Option period / exercise window and how it is exercised
For an option, sets the period during which it stays open and irrevocable, and exactly how the holder exercises it (e.g. written notice delivered to a chosen address by a deadline). The owner is bound not to withdraw or sell to anyone else during this window. Precise timing and a clear notice method avoid arguments about whether and when the option was validly taken up.
Pre-emption trigger and the offer mechanics
For a right of first refusal, defines the trigger ("decides to sell", receives a bona fide third-party offer, etc.), what must be offered to the holder (the price and terms), how the offer is made and the time the holder has to accept or decline before the owner is free to sell to a third party — on no more favourable terms.
Consideration and irrevocability
Records any consideration paid for the option (an option fee) and confirms the owner’s undertaking is irrevocable for the agreed period. While an option can be granted without payment, a stated fee and clear irrevocability wording reduce the risk of the grantor arguing the undertaking was a mere unbinding offer they could withdraw.
Duration, renewal and survival on lease extension
Fixes how long the right lasts and what happens if a lease that contains it is renewed or the property changes hands. Mokone v Tassos held that extending a lease generally extends a pre-emption embedded in it; spell out expressly whether the right survives renewal, cession of the lease and a sale of the property so there is no gap.
Breach, the Oryx remedy and transfer
Addresses what happens if the owner sells in breach — confirming the holder may invoke the Oryx mechanism to step into the third party’s shoes — and deals with transfer, conveyancing costs, transfer duty and the timeline once the right is validly exercised and a sale comes into being.
Option to purchase vs right of first refusal (pre-emption) over property in South Africa
| Feature | Option to purchase | Right of first refusal (pre-emption) |
|---|---|---|
| Core effect | Holder can create a binding sale by simply accepting | Owner must offer to the holder first, but only if the owner decides to sell |
| Can the holder force a sale? | Yes — acceptance during the option period completes the sale | No — the holder cannot compel the owner to sell at all |
| Must it be in writing (land)? | Yes — it can mature into a land sale, so the Alienation of Land Act s 2 applies | No — Mokone v Tassos confirms a pre-emption over land need not be in writing |
| When the land-sale formalities bite | On the option itself (and on acceptance) | Only on the later agreement of sale, once triggered |
| Owner’s freedom | Bound by an irrevocable offer for the option period | Free never to sell; bound only to offer first if a sale is decided on |
| Remedy if owner sells in breach | Enforce the completed sale / claim transfer | Invoke the Oryx mechanism — step into the third party’s position |
Common South African pitfalls
- Treating an option and a right of first refusal as the same thing. They have different legal effects: an option lets the holder force a sale by accepting, while a pre-emption only gives a first chance to buy if the owner chooses to sell. Drafting "first option to purchase" without saying which is meant is a frequent and expensive source of litigation.
- Leaving an option to buy land oral or signature-defective. Because acceptance of a property option creates a sale of land, the option must satisfy section 2 of the Alienation of Land Act 68 of 1981 — in writing and signed by the parties or their duly authorised agents — and must contain the essential sale terms. An oral or non-compliant property option is void.
- Failing to fix the price or a clear price mechanism. A property option that does not contain a determined or determinable price can fall foul of the Alienation of Land Act and be unenforceable. A pre-emption that does not specify the price or terms on which the property must first be offered creates uncertainty about what counts as a valid offer to the holder.
- Vague pre-emption triggers and time limits. Not defining what "decides to sell" means, how the offer must be communicated, and how long the holder has to respond lets an owner sidestep the right (for example via a sham transaction or an instant third-party sale). Tight trigger and notice mechanics are essential.
- Assuming the right automatically survives a lease renewal, cession or sale. While Mokone v Tassos held that extending a lease generally extends an embedded pre-emption, relying on that by default is risky. Say expressly that the right survives renewal, cession of the lease and a change of owner — and record it against the title where appropriate so a later purchaser is bound.
Frequently asked questions
What is the difference between an option and a right of first refusal over property?
An option to purchase is an irrevocable offer: the holder can create a binding sale simply by accepting it within the option period, and the owner cannot withdraw. A right of first refusal (pre-emption) is weaker — it only obliges the owner to offer the property to the holder first if the owner decides to sell, and the owner is free never to sell at all.
Must an option to buy land be in writing in South Africa?
Yes — the safe and settled course is that it must. Because accepting a property option creates a sale of land, the option must comply with section 2 of the Alienation of Land Act 68 of 1981: it must be in writing, signed by the parties (or their authorised agents) and contain the essential terms, including the property and the price. An oral property option is treated as void.
Does a right of first refusal over property have to be in writing?
No. In Mokone v Tassos Properties CC [2017] ZACC 25 the Constitutional Court confirmed that a right of pre-emption over land does not have to be in writing to be valid, because it does not itself transfer land — it only gives the holder the right to enter into a sale if the owner decides to sell. It is the later sale agreement that must meet the Alienation of Land Act formalities. A written pre-emption is still strongly advisable for certainty.
What happens if the owner sells the property in breach of my right of first refusal?
You are not necessarily left only with a damages claim. Under the "Oryx mechanism" endorsed in Mokone v Tassos, the holder of a pre-emption can, by a unilateral declaration of intent, step into the position of the third-party buyer — so a contract of sale is treated as having been concluded with you on the same terms. Acting promptly and getting legal advice immediately is essential.
If my lease with a right of first refusal is renewed, does the right carry over?
Usually yes. In Mokone the Constitutional Court held that when ordinary people agree to "extend the lease", they generally intend to extend all of its terms — including a right of pre-emption contained in it. But you should not rely on this by default: have the renewal expressly confirm that the pre-emption (and its period) continues, so there is no gap.
Can I register an option or right of first refusal against the property’s title?
A personal right such as an option or pre-emption is not, on its own, a registrable real right and is enforced as a contract between the parties. To bind a future purchaser, the right is typically built into a registered long lease or otherwise made known to buyers; an unregistered personal right may not survive a sale to a third party who has no notice of it. Tailored drafting and, where appropriate, registration is how you protect the right against later owners.
Is an option valid if no money was paid for it?
An option can be granted with or without payment of an option fee. The key requirement for a property option is that it complies with the Alienation of Land Act formalities and clearly records the owner’s irrevocable undertaking to keep the offer open. A stated option fee and explicit irrevocability wording reduce the risk of the grantor later arguing the undertaking was a mere offer they could withdraw.
Do I need a lawyer to draft an option or pre-emption clause for property?
It is strongly advisable. The line between an option and a pre-emption, the Alienation of Land Act writing-and-signature requirements, the price mechanism, the trigger and notice mechanics, and survival on lease renewal or sale all have to be exactly right, or the right fails when you most need it. MJ Kotze Inc drafts and reviews property options and rights of first refusal on a fixed-fee basis.
Sources & authority
- Mokone v Tassos Properties CC and Another (CCT113/16, CCT291/16) [2017] ZACC 25; 2017 (5) SA 456 (CC) (24 July 2017)
- Alienation of Land Act 68 of 1981, s 2(1) (lawlibrary.org.za canonical work)
- Alienation of Land Act 68 of 1981, s 2(1) (consolidated text)
This guide is general information, not legal advice. It reflects the law as at June 2026.