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Right of First Refusal Agreement

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Updated August 24, 2026

A right of first refusal is a legal provision often used in real estate to give exclusive rights to an interested party to buy or lease a property before the owner can accept a third-party offer. This right is often included in lease agreements or other types of real estate contracts.

Commonly Used For

  • Tenant to buyer: Included in residential lease agreement to give existing tenant the first priority to purchase the property if the owner decides to sell.
  • Family properties: Used to keep estates within the family by granting heirs the first option to buy.
  • Commercial real estate: Often used by developers or businesses to secure adjacent spaces for future expansion.

How to Create a Right of First Refusal (4 Steps)

  1. Identify the parties and the asset.
  2. Negotiate the consideration.
  3. Specify when the right becomes active.
  4. Determine required timeframes.

1. Identify the parties and the property.

The person receiving the exclusive right to purchase a certain property is known as the grantee. The grantee is usually a tenant, family member, or some party interested in the property. The grantor is the person granting this right, typically the property owner.

2. Negotiate the consideration for this right.

Consideration refers to what the parties exchange in this transaction. The grantor offers the right as consideration, and the grantee’s consideration varies based on the agreement. For instance, the grantee might offer cash, services, some tangible item of value, or an intangible valuable.

3. Specify when this right to purchase becomes active.

A right of first refusal is typically triggered when the property owner receives a legitimate third-party offer to purchase the property, or if the owner formally decides to sell the property.

4. Determine required timeframes.

When the owner receives an offer or decides to sell, they are legally obligated to notify the grantee in writing within a specified timeframe. The grantee must then respond to the notice within the required number of days about their intended action, specifically, whether they will be exercising their right to purchase.

If the right is not exercised during the time limit, the owner may freely accept offers from other buyers.

Sample

Download: PDF, MS Word, ODT

Frequently Asked Questions (FAQs)

  1. What triggers a right of first refusal?
  2. How long does a ROFR last?
  3. What happens if the ROFR holder declines?
  4. Is it binding?
  5. Can it be transferred or assigned?

What triggers a right of first refusal (ROFR)?

A ROFR is typically triggered when the property owner:

  • Receives a legitimate offer from a third party that they want to accept; or
  • Makes a formal decision to place the property on the market.

How long does a ROFR last?

The duration of a ROFR can vary from contract to contract, lasting for a set period or for as long as the property owner holds the asset. Some states regulate how long the right can be held, so it’s best to check your local state laws.

What happens if the ROFR holder declines?

If the ROFR holder declines the chance to exercise the right, the property owner is free to accept a third-party offer for the property.

Is it binding?

Yes — a ROFR is a legally binding contract that requires the property owner to follow the terms of the agreement.

Can it be transferred or assigned?

A ROFR is typically considered a personal right, meaning it is specifically tied to the person holding the right. However, if explicitly stated in the agreement, it can be possible to transfer or assign the right to another party.