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TO SELL OR NOT TO SELL

By: Rabbi Max Sutton

THE CASE

Upon the passing of their father, Harry and Steven inherited a valuable real estate property. Harry, a father of seven children, expressed to his single brother Steven, that he wished to sell the property as he was in desperate need of funds. Steven responded that it would clearly be a mistake to sell at this time. Steven suggested that they maintain their partnership and share in the rental proceeds equally. In Bet Din, Harry submitted a written offer from a third party for the purchase of the property and commented that it would be a shame to reject such an aggressive offer. Steven refused to agree, and instead offered to advance to Harry 100 per cent of the rental proceeds as a loan. Steven made it clear that he was in no rush to get paid back his share of the rent, and in the meantime, Harry can use the extra cash flow to provide for his family. Steven's only stipulation to the loan was that he decides when to sell the property, and that he gets paid back the rent he advanced upon the property’s sale. Harry rejected his brother's offer, explaining that he was presently indebted to others and is not interested in additional loans.

Can Harry force Steven to sell? Can Steven force Harry to be his partner? Is Steven's suggestion to extend Harry his share of the rent as a loan a forcible option? How should the Bet Din rule and why?

TORAH LAW

According to the ruling of the Shulhan Aruch, an heir of an estate is entitled to sell his share of a property to an outside party. Hence, if two brothers inherit a property, one brother cannot prevent the other from selling his half to a third party.

By rule of the Shulhan Aruch, one heir cannot force the other to sell a commercial property in its entirety. Likewise, an heir cannot impose on his fellow heir to buy his share when seeking to terminate the partnership. Since the possibility of selling his share alone to the outside market exists, no further rights are extended to him. In the instance in which private property is inherited and it is impossible for an heir to sell his specific share to the outside, a competent halachic authority is to be consulted.

Nevertheless, as with all partnerships, first right of refusal is given to one’s fellow partner before a joint property can be sold to the outside market. Hence, before an heir can finalize the sale of his portion of the estate, his fellow heir and partner is entitled to buy the share if he is willing to match the terms and purchase price being offered by the third party. The laws governing the rule of first right of refusal are extensive, and only a competent halachic authority can determine when and if they are applicable.

Although it is a positive commandment from the Torah to extend a loan to a fellow Jew in need, nevertheless, it is obvious that one cannot compel another to receive a loan. Furthermore, the laws of interest are violated if a lender stipulates when extending a loan that in addition to the return of the money a benefit or gift of any sort is to be provided by the borrower. This restriction includes a lender who stipulates more favorable terms in a partnership agreement on account of a loan he is extending.

VERDICT

First Right of Refusal

Our Bet Din rejected the claims of both Harry and Steven. Although Harry received a written offer from a third party to purchase the entire property, he is not entitled to impose on Steven to sell his share of the estate. Although Steven offered Harry a loan, Harry is not required to borrow money to maintain their partnership in the property. Furthermore, Steven’s stipulation to the loan represents a violation of Torah interest laws. The newly stipulated right to determine when and if the property is to be sold is viewed as a benefit received solely because of the loan extended, and is therefore forbidden. Our Bet Din explained to Harry that since the property inherited was commercial, he can readily find a buyer for his share. With the ability to find an outside buyer on the market he cannot impose on his brother Steven a buy or sell agreement. Four months later Harry found a potential buyer for his share of the estate. At which point his brother Steven offered to match the purchase price and terms of the buyer. By law, Harry was required to sell Steven his share, and upon doing so, he terminated his partnership with his brother.