Right of First Refusal
The right of first refusal gives a party the first chance to buy or rent property before it’s offered to others. Understand its use in leases and HOAs.
Definition
A right of first refusal (ROFR) is a contractual right that gives a specified party the opportunity to purchase or lease a property before the owner can sell or rent it to someone else. The holder of the ROFR has the right to match the terms of a bona fide offer that the owner receives. ROFRs appear in condo association documents, ground leases, or shareholder agreements to give existing tenants, co‑owners, or associations control over future ownership changes. These rights can complicate transactions and may deter potential buyers or investors if they must wait for the holder’s decision.
Why It Matters
Buyers avoid properties carrying a right of first refusal, because nobody wants to spend $900 on an inspection just to set the price for someone else. The right does not block a sale, it delays it and thins the buyer pool, so offers come in lower or not at all. Sellers who forget one exists can watch a closed sale get unwound years later.
Examples
The landlord accepts $640,000 from an outside buyer. The tenant holds a 30-day match right, matches on day 28, and the original buyer eats $1,800 in inspection and appraisal costs.
A condo association's documents give it 15 days to match any sale. The buyer's lender refuses to order an appraisal until the waiver letter arrives, and closing slips two weeks.
Two siblings own a cabin with a mutual right of first refusal. One wants out, the other cannot arrange financing inside the 60-day window, and the property goes to market with the right expired.
Tips
Get the waiver in writing before your inspection period ends, not just before closing. Every dollar spent during the match window is money at risk.
Holding a right of first refusal? Calendar the deadline the day you learn of an offer. These windows are short, they expire on their own, and no one is obligated to remind you.
When granting one, define what counts as a bona fide offer and cap the match window at 10 to 15 days. An open-ended right of first refusal makes a property close to unsellable.
Related Terms
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Net Lease
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