What is Right of First Refusal?

Definition

A right of first refusal (ROFR) gives one party the right to match any offer made by a third party before a transaction can proceed with that third party. This clause is common in investment agreements, real estate transactions, and commercial leases. The holder of the ROFR does not have to act, but they get the first opportunity to accept or decline before the offering party can deal with anyone else. This matters because it can significantly affect your ability to negotiate freely, since potential buyers or partners may be discouraged from making offers they know can be matched. For example, if your commercial lease includes a ROFR on the adjacent office space, the landlord must offer you that space at the same terms as any third-party offer before leasing it to someone else. Watch for ROFR clauses with short response windows (sometimes as few as 5 business days), vague matching criteria that do not specify whether you must match all terms or just the price, and clauses that give the holder unlimited time to decide.

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