Real Estate Contracts
What Is a Right of First Refusal?
A right of first refusal (ROFR) is a contractual right that gives a specified party the opportunity to match an offer on a property before the seller can accept it from a third party. It is a pre-emptive right — not a guaranteed purchase right, but the right to step in and match the deal.
Rights of first refusal appear in lease agreements, co-ownership arrangements, business partnerships, and sometimes in residential sales contracts. They are a tested topic on many state licensing exams.
How Right of First Refusal Works
Common Contexts
Tenant ROFR: a lease gives the tenant the right to buy the property if the landlord decides to sell. Co-owner ROFR: one owner must offer their share to the other owner before selling to a third party. Condo associations sometimes have ROFR on unit sales.
The Matching Requirement
When the seller receives an offer they want to accept, they must first notify the ROFR holder with the terms. The ROFR holder then has a specified period (often 30–72 hours) to match those exact terms. If they match, the contract is formed with them instead.
What Happens If the ROFR Holder Declines
If the ROFR holder declines or fails to respond within the specified period, the seller is free to accept the third-party offer. The ROFR does not prevent the sale — it just gives the holder the first opportunity.
ROFR vs. Option to Purchase
An option to purchase gives the holder the right to buy at a specific price and time — regardless of other offers. A ROFR only triggers when the seller receives a third-party offer. An option is more powerful protection for the holder.
Exam Key Points: Right of First Refusal
ROFR gives the holder the right to match an offer — not to set the terms
Seller must notify the ROFR holder before accepting a third-party offer
The holder has a limited time to respond — failure to respond ends the right
ROFR is common in leases, co-ownership agreements, and condo association documents
ROFR runs with the contract, not the property — check the original agreement
An option to purchase is stronger than a ROFR — gives the right to buy at a set price
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