What does first right of refusal mean in a real estate contract?

A right of first refusal is a contractual right giving its holder the option to transact with the other contracting party before others can. The ROFR assures the holder that they will not lose their rights to an asset if others express interest.

When it comes to real estate transactions, there are many terms that can be confusing to those who are not familiar with the industry. One such term is “right of first refusal.” This article will explain what this term means and how it can impact a real estate transaction.

What is right of first refusal?

Right of first refusal is a legal term that gives a person or entity the right to purchase a property before it is offered to anyone else. This means that if the owner of a property decides to sell it, they must first offer it to the person or entity with the right of first refusal. If that person or entity declines to purchase the property, the owner is free to sell it to someone else.

Who has the right of first refusal?

The right of first refusal can be granted to anyone, but it is most commonly given to tenants or business partners. For example, if a landlord wants to sell a property that is currently being rented, they may give the tenant the right of first refusal. This gives the tenant the opportunity to purchase the property and continue living there if they choose to do so.

How does right of first refusal impact a real estate transaction?

If a property has a right of first refusal attached to it, it can make the transaction more complicated. The owner must first offer the property to the person or entity with the right of first refusal, which can delay the sale process. Additionally, if the person or entity with the right of first refusal decides to purchase the property, they may do so at a lower price than what the owner could have received on the open market.

FAQ

• Can a right of first refusal be transferred to someone else?

Yes, a right of first refusal can be transferred to another person or entity.

• Is a right of first refusal permanent?

No, a right of first refusal can be removed or renegotiated if both parties agree to do so.

• Can a right of first refusal be waived?

Yes, the person or entity with the right of first refusal can choose to waive their right if they do not wish to purchase the property.

Conclusion

Right of first refusal is an important legal term in real estate transactions. It gives a person or entity the opportunity to purchase a property before it is offered to anyone else. While it can complicate a transaction, it can also provide benefits for both parties involved. If you are considering purchasing or selling a property with a right of first refusal attached, it is important to understand how it works and how it may impact the sale process.