Right of First Refusal
Definition:
The Right of First Refusal (ROFR) is a contractual right that gives an individual or entity the first opportunity to purchase a property before the owner offers it to another buyer. If the owner decides to sell, they must first give the party with the ROFR the chance to match or better the offer. This right is often used in leases, partnerships, and joint ventures to ensure that specific individuals or organizations have the opportunity to purchase the property before it is sold to others.
🔍 Did You Know?
Right of First Refusal clauses are common in condominium associations, where existing owners may have the option to purchase a unit before it is sold to an outside buyer.
Examples:
Example 1:
A tenant has the Right of First Refusal in their lease agreement. When the landlord decides to sell the rental property, the tenant is given the chance to buy the property under the same terms as the offer made by another potential buyer.
Example 2:
An investor in a joint venture has the ROFR on a commercial property. When the other partner decides to sell their share, the investor is given the first opportunity to match the sale price and purchase the property.
Why It’s Important:
The Right of First Refusal provides security for individuals or entities with a vested interest in a property. It allows them to have the first opportunity to purchase the property, helping to maintain control over assets or properties they are invested in. For sellers, including an ROFR clause can be a useful negotiation tool, especially in agreements with partners, tenants, or family members.
Who Should Care:
- Tenants who want the option to purchase the property they are renting if the owner decides to sell.
- Real estate investors involved in partnerships or joint ventures who want the first opportunity to buy a property if it goes up for sale.
- Property owners who want to offer family members, business partners, or other specific parties the right to purchase a property before it is listed publicly.
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