Right of First Refusal
A tenant right to match a third-party offer for space or for the property before the landlord can accept that offer.
Also called: ROFR, first refusal right
A right of first refusal (ROFR) lets a tenant match a third party’s offer, for adjacent space or for the property itself, before the landlord can accept it. The landlord must present the offer and wait for the tenant’s decision within the period the lease sets.
ROFR vs. ROFO
A right of first refusal is often confused with a right of first offer (ROFO):
| Right of first refusal | Right of first offer | |
|---|---|---|
| Trigger | A third-party offer the landlord would accept | The landlord deciding to lease or sell |
| Tenant’s choice | Match the offer’s terms | Make or accept an offer first |
| Effect on the market | Can deter third parties | Lighter burden on the landlord |
Landlords generally prefer a ROFO, because a ROFR can discourage prospective tenants or buyers from spending time on an offer the existing tenant can simply match.
Common forms
- Expansion ROFR on space adjacent to the tenant’s suite
- Sale ROFR on the building, which can complicate a sale and is often negotiated out
- Limited ROFR, applying only to specific floors, only during part of the term, or only once
What to track
Each ROFR has a response window, often five to fifteen business days after the landlord delivers notice of the offer. Missing the tenant’s response deadline or failing to give proper notice can expose the landlord to a claim, and in a sale, a title issue. Treat the notice and response periods as critical dates, and record the right in the lease abstract with the space it covers.
The commercial lease administration guide covers how rights like these sit alongside renewal options and other critical dates.