Commentary on the Sections Miscellaneous Section 115: Rights of pre-emption
177.A right of pre-emption is a right of first refusal. The grantor undertakes that he or she will not sell the land without first offering it to the grantee. It is similar to but not the same as an option, because the grantee can purchase the property only if the grantor decides that he or she wants to sell.
178.There is uncertainty as to the legal position of rights of pre-emption. The position may be that a right of pre-emption does not confer on the grantee an interest in land but when the grantor chooses to sell the property, the right of pre-emption becomes an equitable interest in land.
179.If this is the legal position then, for example, if A grants B a right of pre-emption over registered land which B immediately protects by entry of notice in the register, and A then mortgages the land to C, it seems likely that C will not be bound by the right of pre-emption because the execution of the mortgage probably does not cause the pre-emption to crystallise into an equitable interest. C could therefore, in exercise of his paramount powers as mortgagee, sell the land free from B’s right of pre-emption.
180.This section provides that a right of pre-emption in relation to registered land has effect from the time of creation as an interest capable of binding successors in title (subject to the rules about the effect of dispositions on priority).
181.So, if on or after the coming into force of the Act the facts were as in the above example, the effect of this section would be that B’s right of pre-emption would have priority over C’s mortgage. If, however, B did not protect his right by notice before C registered his mortgage (and B was not in actual occupation of the affected land), C would not be bound by the right because of the effect of dispositions on priority.
182.If the law relating to rights of pre-emption is as discussed above, then this Act will change the law in its application to registered land so this section provides that it applies to rights of pre-emption created on or after the Act comes into force.