Also known as:first rights to refusal · first right of refusal · right of first refusal · ROFR
Written by attorneys · grounded in primary & secondary sources — see below
A preemptive right granted to a designated person that entitles that person to purchase an interest in property on the same terms as those offered by a third party. The right arises in donative transfers or servitudes and is not treated as a restraint on alienation when its price term and exercise period are reasonable.
Sources & Authorities· 1 primary source
Select any source to read its text and confirm it supports the definition.
Cases
Restatements
Casebooks
How it applies
Common Examples
4
Will Devise With Formula Price
A testator's will devises a storefront to his son but subjects the devise to a right of first refusal held by the anchor tenant at a rent-based formula price capped at 2012 levels with a ninety-day exercise window. After rents rise, the son receives a higher third-party offer. The tenant attempts to purchase at the lower formula price. Because the price mechanism is fixed to a historical cap that no longer reflects market value at the time of the devise, the right operates as an unreasonable restraint.
Joint Tenancy Lease Option
A joint tenant leases property to a tenant and includes a right of first refusal allowing the tenant to match any third-party purchase offer. One joint tenant dies. The surviving joint tenant seeks to sell the property free of the right. The right of first refusal remains enforceable against the surviving tenant because it was created during the joint tenancy and binds the interest transferred by operation of law.
Tenhet v. Boswell(1976) 18 Cal. 3d 150, 155, 133 Cal. Rptr. 10, 554 P.2d 330
Commercial Option Duration
A nonprofit theater sells property subject to a long-term purchase option held by a developer that allows the developer to buy the land decades later at a fixed price. When the developer attempts to exercise the option, the theater challenges it as violating the rule against perpetuities. The option is treated as a remote contingent interest that is subject to the same vesting rules that govern other future interests in commercial transactions.
The Symphony Space, Inc. v. Pergola Properties, Inc.669 N.E.2d 799 (1996)
Land Reform Condemnation
A state legislature authorizes condemnation of large residential tracts held by a few owners so that the land can be redistributed to existing tenants. The tenants argue that the program is an unconstitutional taking because it transfers property from one private owner to another. The program is upheld because the redistribution serves a legitimate public purpose of correcting oligopolistic land ownership that harms the housing market.
Hawai`i Housing Authority v. Midkiff467 U.S. 229, 233-234 (1984)
Common questions
Frequently Asked
4
When is a right of first refusal in a will enforceable rather than an invalid restraint on alienation?+
The right is enforceable if its price term and exercise period are reasonable when the donative transfer takes effect. Reasonableness is measured by whether the price reflects fair market value or a fair formula and whether the time allowed for exercise is commercially practical. If either element is unreasonable, the provision is treated as a disabling, forfeiture, or promissory restraint and is generally unenforceable.
Supporting sources
Does a fixed historical price cap in a testamentary right of first refusal satisfy the reasonableness requirement?
No. A price formula capped at a past year's level becomes unreasonable once market values rise, because it allows the holder to purchase at an artificial discount unrelated to current value. The Restatement requires the price term to be reasonable at the time the interest passes, and an unadjusted historical cap fails that test.
Supporting sources
How does a buyer-approval requirement combined with a right of first refusal affect validity?+
Adding a requirement that the seller obtain the holder's approval of any third-party buyer converts the arrangement into something more than a simple right of first refusal. The approval power gives the holder veto authority over buyer identity for reasons unrelated to price and creates a substantial deterrent to third-party offers, rendering the overall provision an unreasonable restraint.
Supporting sources
What time period for exercising a right of first refusal is considered reasonable?+
A thirty- to ninety-day window is typically reasonable because it gives the holder time for due diligence and financing without unduly delaying a sale. A one-year period is unreasonable because it creates prolonged uncertainty that deters potential buyers and impairs marketability.
Supporting sources
, implied that the lessor possessed a fee simple. It provided in part: “Lessee is given a
first
exclusive
right
, privilege and option to purchase the house and lot covered by this lease....…
, or
right of first refusal
, does not give its holder the power to compel an unwilling owner to sell; it merely requires the owner, when and if he decides to sell, to offer the property
first
to the party holding the…
first right of refusal
in the event Lessors desire to lease said premises for a period of time commencing immediately after the termination date hereof. “5. Lessee shall have no
right
to assign or…
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