Have a pre-emptive right of first refusal over the sale of a property? Unless you tick every legal box, that ‘right’ could vanish into thin air, and you could be the one packing your bags.
A recent case heard by the Western Cape High Court is a costly reminder that legal formalities are not mere suggestions.
At the heart of this case is a dispute over a high-end Hout Bay property, commanding over R40,000 in monthly rent, located in Kenrock Country Estate. The property was owned by Michael Murphy; however, in late 2024, Murphy leased the property to Pegasus Treasury (Pty) Ltd (Pegasus), the applicant in this matter, where Pegasus’ representative Marcel Joubert and his daughter occupied the residence.
Pre-emptive right of first refusal
The lease agreement between Murphy and Pegasus contained a clause that gave Pegasus a pre-emptive right of first refusal in the event that the property was sold. A pre-emptive right of first refusal, also known as a “preference”, is a mechanism that affords a person the right to buy a property or asset before anyone else, should the owner decide to sell it. The lease agreement stated that Joubert would have 48 hours to “respond to any offer and either match or increase the offer”.
On 22 October 2024, Murphy finalised an agreement of sale with Pierre Badenhorst (the Badenhorst Offer). The Badenhorst Offer had a suspensive condition stipulating that Murphy’s acceptance of the offer was dependent upon Pegasus being unable to exercise its right of first refusal in terms of the lease agreement.
Pegasus was alerted of the sale of the property on 24 October 2024 and was given 48 hours to exercise its right of first refusal. During the 48-hour period, Joubert sent an email to both Murphy and Badenhorst, the conveyancing attorneys, and the estate agent.
In his email, Joubert brought up a number of issues about the Badenhorst Offer, referring to it as the “supposed offer”, alleging that there were “multiple clear defects” and “questionable aspects” of the agreement. He stated that the appointed conveyancing attorneys had a “clear conflict of interest”, given that Pegasus was a longstanding client of theirs.
Most importantly though, despite his complaints and criticisms, in the email, Joubert stated that “…we hereby confirm that we intend exercising, and hereby do exercise our right of first refusal…”. However, there was no signature on the email, nor was the email accompanied by any signed document containing Pegasus’ offer to purchase the property.
Sandra Sithole, Rethabile Shabalala and Kimara Rampersad 28 May 2025 Right had to be exercised within 48 hours
Despite the lack of a signature, or an offer for the property by Pegasus, the parties conducted themselves as though Pegasus had exercised its right of first refusal during the 48-hour period.
On 1 November 2024, Joubert sent a copy of the Badenhorst Offer to the parties, riddled with several of his amendments. While the purchase price and deposit in respect of the property stayed the same, the entire agreement was subject to numerous criticisms about the state of disrepair of the property, where Joubert claimed that he reserved a right to claim a reduction of the purchase price.
The amended agreement as sent by Joubert can be referred to as “the Pegasus Offer”. Three days later, the attorneys acting for Murphy sent Pegasus an email with a further sale agreement attached. The sale agreement was a copy of the Pegasus Offer with the clauses that Joubert added, now deleted, so that the agreement would be on the same terms as the original Badenhorst Offer that Murphy had entered into. This agreement will be referred to as “the Murphy Offer”.
The issue before the court was that the parties could not agree on which agreement of sale was operative: the Badenhorst Offer between Murphy and Badenhorst; the Pegasus Offer, which was the Badenhorst Offer riddled with Joubert’s amendments and criticisms; or the Murphy Offer, which was the Pegasus Offer with the amendments and criticisms deleted?
Badenhorst and Murphy believed that the Badenhorst Offer was operative, where Pegasus was not entirely clear about which offer was operative as its papers referred vaguely to “the sale” and did not identify which documents encompassed that sale. Despite this, Pegasus claimed to be recognised as the owner of the property.
Steven Fisher 25 Jun 2021 The applications before the court
The first application before the court was Badenhorst’s application to have Pegasus evicted from the property because, according to him, the Badenhorst Offer was valid. As per the terms of the agreement, he took transfer of the property on 4 December 2024 and wanted Pegasus out so that he could take occupation of his property.
The second application was a specific performance application, launched by Pegasus, in which it claimed relief declaring that “the sale” between it and Murphy was valid, binding and enforceable, and directing that the property therefore be transferred to it.
The specific performance application
The court dealt with the specific performance application first, as that application held the key to determine who the current owner of the property was. Once that was established, the eviction application would follow course.
In its determination of this matter, the court used the case of Aarifah Security Services CC v Jakoita Properties (Pty) Ltd and Others to emphasise the legal requirements for the exercise of the right of first refusal. These requirements, inter alia, direct that there “must be an offer and an acceptance, both in writing and signed”.
For Joubert to have correctly exercised Pegasus’ right of pre-emption within 48 hours, he needed to have submitted an offer for the property that was in writing and signed. All Joubert did was send an unsigned email stating that he would exercise the right.
Therefore, it is on this basis that the court found that Joubert had failed to comply with the legal requirements for a valid exercise of his pre-emptive right.
In court, Pegasus’ senior counsel fairly conceded that the Aarifah Security Services case set out the applicable legal requirements, but argued that Pegasus could overcome its implications because of an argument based on waiver.
Waiver refers to an agreement wherein a party voluntarily surrenders a right or privilege. According to Pegasus, the fact that Murphy’s attorney had sent an email to Joubert in which she had referred to the “exercised” right of first refusal and had attached the signed Murphy Offer amounted to a “clear waiver” of any reliance on the 48-hour window.
The court expressed having “grave doubts” about whether conduct that took place after the expiry of a period for which a right existed could ever constitute a waiver of a time limit on that right.
However, because Pegasus did not raise the argument of waiver in its affidavits, and because Pegasus at no point submitted a written offer for the property on the same terms and conditions as the Badenhorst Offer, the argument of waiver failed to gain the court’s approval.
Lest we forget, the pre-emptive right given to Pegasus in the lease agreement was a right to either match or increase an offer already received by Murphy.
Materially worse offer
The Pegasus Offer was not an offer on the same or better terms than the Badenhorst Offer; the court goes as far as to describe it as a “materially worse offer”.
Comparatively, the Badenhorst Offer did not have the reservations and claw backs that the Pegasus Offer did – in fact, the property was sold voetstoots, ie. as is, for R9,500,000, no more and no less.
It is on this basis that the court asserts that even if the argument on waiver had been accepted, at no point did Pegasus advance an offer for the property that matched the Badenhorst Offer.
In its papers and arguments, Pegasus tried to downplay the amendments that Joubert had made in the Pegasus Offer, where Pegasus argued that none of the handwritten annotations made by Joubert were material, where the court did not hesitate to dismiss this argument as well.
Decisively, the court found that Pegasus failed to exercise its pre-emptive right, as it failed to step into the figurative shoes of Badenhorst, and ruled that only the Badenhorst Offer remained as the valid, binding agreement of sale between the parties.
Consequently, the specific performance application launched by Pegasus failed because Badenhorst was found to be the owner of the property.
The eviction application
Now that it was resolved that Badenhorst owned the property, Badenhorst sought to have the property vacated by the end of October 2025, where Pegasus requested to remain in the property until the end of January 2026.
In determining just and equitable terms of eviction, the court found that Joubert and his daughter were persons of means, as they had been paying in excess of R40,000 per month under their lease for the property. Therefore, it goes without saying that no issue of homelessness would arise from their eviction.
However, Pegasus raised three points for delaying the eviction until the end of January, claiming that first, Joubert was undergoing surgery and would be incapacitated until the end of November 2025; secondly, that his daughter was undergoing university studies and that it would therefore be disruptive for her to have to leave the house before the year end; and that, lastly, they would need time to find alternative accommodation.
The court was mindful of Joubert’s health conditions but did not necessarily entertain the last two points as Joubert’s former wife, the mother of his daughter, was found to have been residing on the adjacent property in the estate. Thus, the court was not convinced that their eviction would be too disruptive for his daughter, as she could simply go next door, to her mother.
On these grounds, the court dismissed Pegasus’ specific performance application, granted Badenhorst’s eviction application, and directed that Joubert and his daughter were to vacate the property by 30 November 2025, failing which the Sheriff would be authorised to evict them.
This case underscores a critical point: if you want to enforce your personal rights, it is important to cross your t’s and dot your i’s. If you opt out of the formalities, the court will not hesitate to show you the door – quite literally.
