Also known as: right of first refusal · ROFR · first right of refusal · right of first offer
Written by attorneys · grounded in primary & secondary sources — see below
An option or preemptive right granted to a designated person allowing that person to purchase property on the same terms offered by a third party or at a formula price before the property may be sold to others. The right is not treated as a restraint on alienation when its price and exercise period are reasonable at the time of the grant.
Amber inherited a storefront from his father under a will that granted Stone Mall a right of first refusal at a rent-based formula capped at 2012 levels with ninety days to exercise. When Amber later received a higher offer from Clear Market, Stone Mall attempted to match at the lower formula price. The court evaluated whether the capped price and exercise window remained reasonable when the devise took effect.
Hazel Tenhet and her co-tenant leased property to a tenant who received an option that functioned as a right of first refusal. After the co-tenant died, the surviving joint tenant sought to enforce or avoid the preemptive right. The court examined whether the right survived the death and bound the surviving owner.
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A shopping-center landlord granted a tenant a right of first refusal on any sale of the center, exercisable at the same price and terms offered by a third party within thirty days of notice. When the landlord later received a bona-fide offer, the tenant matched it. The court assessed whether the price term and short exercise window kept the right reasonable.
Symphony Space held a long-term lease containing a purchase option that operated as a right of first refusal at a fixed price. When the landlord sought to sell the building years later, the tenant attempted to exercise the option. The court determined whether the option violated the rule against perpetuities because of its potentially remote vesting date.
A developer recorded servitudes giving the homeowners association a right of first refusal to buy any lot at the same price offered by a third party, exercisable within thirty days. When an owner received an outside offer, the association matched it. The court evaluated whether the short exercise period rendered the restraint reasonable.
Ranchers holding grazing permits challenged an agency decision that effectively gave a third party priority access to water rights. They argued the decision violated their statutory right of first refusal to renew their permits. The Court examined whether the ranchers had standing to assert the preemptive interest in federal court.
A right of first refusal in a donative transfer is enforceable if its price term and exercise period are reasonable when the transfer occurs. If either term is unreasonable, the provision is treated as a disabling, forfeiture, or promissory restraint and is subject to invalidation under the rules governing those restraints.
Supporting sources
Yes. A price formula capped at a past year's level becomes unreasonable when market rents have risen substantially by the time the donative transfer takes effect, because the cap no longer reflects fair value and unduly burdens alienation.
Supporting sources
A thirty- or ninety-day period is typically reasonable because it gives the holder time to evaluate the offer without creating excessive uncertainty for third-party buyers or financing.
Supporting sources
…ownership. HHA is authorized to lend these tenants up to 90% of the purchase price, and it may condition final transfer on a right of first refusal for the first 10 years following sale. §§ 516-30, 516-34, 516-35. If HHA does not sell the lot to the tenant residing there, it may lease the lot or sell it to someone else, provided that…