Right of First Refusal

In depth

A right of first refusal (ROFR) requires the property owner to present any bona fide third-party offer to the ROFR holder, who can match the offer or decline within a specified window. Misconception: ROFR is not the same as an option; the ROFR is reactive (triggered by a third-party offer) while an option is unilateral and exercisable by the holder. Practically, ROFRs appear in lease options, partnership agreements, and family property arrangements. Sellers should know that ROFRs can chill outside offers because buyers may be reluctant to bid against a holder. ROFRs should be recorded to bind successors, and they should specify the trigger, timeline, and method of acceptance. Poorly drafted ROFRs lead to litigation.