Right of First Refusal

Right of First Refusal

The Right of First Refusal (ROFR) is a contractual agreement that grants an individual or entity the opportunity to purchase an asset before the owner is able to sell it to another party. This right is commonly found in real estate transactions, business partnerships, and shareholder agreements.

In practice, if the owner decides to sell the asset, they must first offer it to the holder of the Right of First Refusal under the same terms and conditions they intend to offer to third parties. If the holder declines the offer, the owner is then free to sell the asset to others. This right protects the interests of the holder by ensuring they have the first chance to acquire the asset, which can be particularly valuable in maintaining control over a business or property.

For example, in real estate, if a landlord has a tenant with a Right of First Refusal on the property, the landlord must inform the tenant if they decide to sell the property and provide them with the opportunity to purchase it before seeking buyers on the open market. Similarly, in a business context, a partner may have a Right of First Refusal to buy out another partner’s shares if they decide to sell, preserving their stake in the company and preventing unwanted external parties from entering the business.