Right Of First Refusal In Relation To Real Estate

Introduction

This article aims to provide an overview of what constitutes a right of first refusal ("ROFR") in relation to real estate (referred to herein as "property") and the salient considerations to be borne in mind by parties considering a ROFR agreement.

Overview of ROFR

A ROFR in relation to real estate essentially arises where the owner of the land (Grantor) contracts that, if and when he decides to sell the property, he will first offer it to the other contracting party (Grantee) ahead of any other purchaser. The ROFR, unlike an option to purchase, is not an offer to sell, and does not give the Grantee the right to buy.

An instance where a party may wish to obtain a ROFR is when a tenant desires to extend its continued occupation at the property. In such a case, the tenant may, other than or in addition to an option to renew the tenancy, negotiate for a ROFR to be included in the tenancy agreement, with the tenant effectively being placed in the