Right of First Refusal
Right of first refusal is a contractual right that gives a person or entity the opportunity to purchase a property before the owner can sell it to someone else. When the owner decides to sell, they must first offer the property to the holder of this right at the same terms offered by a third-party buyer.
Example
“The tenant had a right of first refusal, so when the landlord decided to sell the building, she could match any outside offer.”
Memory Tip
Think 'first in line' - you get the first chance to say yes or no before anyone else can buy.
Why It Matters
This right protects tenants, business partners, or neighboring property owners from being surprised by unwanted new ownership and gives them priority access to purchase property they have an interest in. It can significantly impact a property's marketability and sale process.
Common Misconception
Many believe right of first refusal means the holder can force a sale at any time, but it only gives them the right to match an offer when the owner voluntarily decides to sell.
In Practice
A commercial tenant with right of first refusal would be notified if their landlord receives a $500,000 offer from another buyer, giving the tenant the opportunity to purchase the building for the same $500,000 before the sale to the outside party can proceed.
Etymology
This term combines 'right' (legal entitlement) with 'first refusal,' meaning the first opportunity to refuse or accept an offer before others.
Common Misspellings
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