What is the first right of refusal clause in a lease?
Asked by: Eleanora Bednar MD | Last update: March 11, 2026Score: 4.4/5 (6 votes)
A Right of First Refusal (ROFR) clause in a lease gives a tenant the first chance to buy the property or lease additional space if the landlord decides to sell or offer new space, allowing the tenant to match a third-party offer before it goes public. It's a contractual right that provides security and opportunity, letting tenants "get first dibs" on a familiar space under the same terms offered by another buyer or tenant, but it doesn't obligate the landlord to sell or lease.
What is the first right of refusal lease clause?
Right of First Refusal to Lease is a lease clause that gives an existing tenant the first opportunity to lease additional space that is currently vacant or might become available to lease when another tenant vacates a space in the property.
Why is the right of first refusal bad?
Because the provision deters potential buyers, the right of first refusal is costly for the contracting parties, and, if the sole aim of the contracting parties is to eliminate a future breakdown in bargaining, that goal can be achieved at a lower cost by committing to a paper auction.
What is an example of a first right of refusal?
Sample Right of First Refusal Clauses. Source Lease Amendment Agreement [ROCKET COMPANIES, INC.] Tenant is granted the right of first refusal to lease all premises in the Building, as set forth in the Lease.
Do tenants have a right of first refusal?
Standard Clauses favoring the tenant for use in a California commercial lease in which the landlord grants the tenant a right of first refusal (ROFR) to purchase the real property where the premises are located.
The new residential letting rules from 1st March 2026-update
What are the rules for the right of first refusal?
ROFR rules (Right of First Refusal) grant a specific party the priority to buy an asset (like real estate or business equity) before the owner can sell to anyone else, requiring the owner to present any third-party offer to the ROFR holder first, who then gets the chance to match those terms. Key rules involve the owner notifying the holder, the holder matching terms (not negotiating new ones), reasonable timeframes (e.g., 10-30 days), and clear procedures to prevent delays, disputes, and reduced marketability.
What is the first refusal of a lease?
CASE LAW UPDATE: A RIGHT OF FIRST REFUSAL (PRE-EMPTION) IN A LEASE. A right of pre-emption is a contractual right, affording the holder the first opportunity to purchase property, before it can be offered to another buyer. In other words, it is a right of first refusal. The right usually exists for an agreed period.
Is a right of first refusal enforceable?
As noted above, a ROFR is enforceable when the price of the property, the time the holder has to accept the ROFR, and the ROFR's purpose are deemed reasonable.
What are the exceptions to the right of first refusal?
You will not be a qualifying tenant and will not have the right of first refusal if you are a shorthold tenant, an assured tenant, a business tenant or if you are an otherwise qualifying tenant but own three or more flats in the same building.
What is the right of first refusal in simple words?
A right of first refusal is a contractual agreement between two parties that gives one the ability to be the first buyer. This party can match an offer made by a third party and purchase an asset, or they can refuse to match it, in which case the seller can proceed with selling it to that third, or another, party.
Is it wise to give someone a ROFR?
Ultimately, while an ROFR clause is typically considered to be beneficial to the tenant, it can certainly be put to good use by a landlord or owner as the inclusion of an ROFR clause can be a powerful negotiating tool when establishing a lease.
What happens if the right of first refusal is violated?
What happens if the right of first refusal agreement is violated? If one party fails to uphold their end of a right of first refusal agreement, the other party may sue them.
What is the law of first refusal?
Right of first refusal (ROFR or RFR) is a contractual right that gives its holder the option to enter a business transaction with the owner of something, according to specified terms, before the owner is entitled to enter into that transaction with a third party.
What are the downsides of first refusal?
A right of first refusal is a serious detriment to the value and marketability of property and often leads to litigation. In most situations you should avoid granting rights of first refusal if at all possible.
How to terminate a right of first refusal?
In the event Seller is unable to obtain and deliver to Purchaser the Seller's ROFR Affidavit, or if the ROFR Holder has elected in writing to exercise its Right of First Refusal, then Purchaser shall have the right to terminate this Agreement by providing written notice to Seller, in which case all Earnest Money ...
What is the difference between lease option and right of first refusal?
By choosing a right of first refusal versus an option, the owner of the property has more control over the sale of their property, whereas with an option the holder can force the sale at will. With a Right of First Refusal, the holder must wait until the owner decides to sell the property.
What are the requirements for the right of first refusal?
Importantly, an option to purchase and a right of first refusal must comply with certain formalities to be legally enforceable, namely it must be in writing, be signed by the parties, contain a legal description of the property, and specify the consideration payable.
What is the first right of refusal clause in a lease gives the tenant?
A right of first refusal stipulation in a contract, lease agreement, or other formal real estate property agreement grants its holder the first opportunity to make an offer on a property and buy it if it goes on the market.
Can a leaseholder refuse to sell the freehold?
If you are a qualifying lessee, you will likely be entitled to Right of First Refusal. Should this be the case, the landlord must serve a Section 5 Notice onto you and all other qualifying tenants and give you an adequate time in which to respond before they can sell the freehold title to anyone else.
Does a right of first refusal ever expire?
In a case of first impression in California, the California Court of Appeal in Smyth v. Berman held that in the absence of specific language to the contrary, a right of first refusal (ROFR) contained in a written lease expires when the tenant becomes a “holdover” tenant.
Does a right of first refusal need to be notarized?
The agreement is triggered when the owner receives a third-party offer to buy the property. For the agreement to be recordable, it must be signed by the owner and acknowledged before a notary or two or more credible witnesses (Section 12.001, Texas Property Code).
What is the 72 hour first right of refusal?
The seller will keep the property on the market but accept a contingent offer, providing buyers with a 72-hour (negotiable) first-right-of-refusal notice to perform in the event seller receives a better offer. 2. The seller will take the property off the market and wait for the buyer to sell the buyer's existing home. ...
What is the right of first refusal on a lease?
Right of First Refusal to Lease Additional Space (Commercial Lease) (Pro-Landlord) A Standard Clause for use in a commercial lease where the landlord grants the tenant a right of first refusal (ROFR) to lease additional space. A ROFR is a type of preemptive right and generally favors the tenant.
What is Section 42 of the Landlord and Tenant Act 1987?
Section 42 of the Landlord and Tenant Act (LTA) 1987 provides that contributions to certain variable service charge funds (and to sinking funds) in respect of residential property should be paid into a trust fund.
What triggers a right of first refusal?
Right of first refusal vs.
Mechanism: The holder gets the first opportunity to negotiate and make an offer before the owner can offer the asset to others. Trigger: Activated when the owner intends to sell but before any offers are received.