Right of First Refusal: What It Means for You

What Is a Right of First Refusal?

A right of first refusal (ROFR) gives one party the opportunity to match any offer before the other party can accept it from a third party. In other words, before selling, leasing, or licensing to someone else, the owner must first offer the same terms to the ROFR holder.

How It Works in Practice

1. The owner receives a bona fide offer from a third party
2. The owner presents that offer to the ROFR holder
3. The ROFR holder has a defined period (often 10-30 days) to match the offer
4. If the ROFR holder matches, the deal goes to them. If not, the owner can proceed with the third party on the same terms.

Common Contexts

• Real estate. Tenants may have a ROFR to purchase the property they rent if the landlord decides to sell.
• Business partnerships. Partners may have a ROFR on each other's ownership interests to prevent unwanted third-party ownership.
• Publishing and entertainment. Authors and creators may grant publishers or studios a ROFR on future works.
• Commercial leases. Tenants may have a ROFR on adjacent spaces that become available.

ROFR vs. Right of First Offer

These are different. A right of first offer (ROFO) requires the owner to offer the asset to the holder before seeking third-party offers. A ROFR only activates after a third-party offer exists. A ROFO is generally considered less restrictive for the owner.

What to Watch For

• Matching terms. Ensure the clause clearly defines what "matching" means, especially for non-monetary terms.
• Time limits. A short response window may not give you enough time to secure financing or perform due diligence.
• Chilling effect. A ROFR can discourage third parties from making offers, knowing the holder can simply match. This can depress the price.

When to Consult a Lawyer

Consider consulting an attorney if you are granting or receiving a ROFR, especially in real estate or business ownership contexts where the financial stakes are significant and the triggering events need precise definition.

This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.