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Also known as:pre-emptive right of first refusal · preemptive ROFR · ROFR · right of first refusal
Written by attorneys · grounded in primary & secondary sources — see below
A right granted to a designated person to purchase property on the same terms offered by any bona fide third party before the owner may sell to that third party. The right arises in donative transfers or servitudes and is evaluated for reasonableness as to price and exercise period to determine whether it constitutes an invalid restraint on alienation.
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
Book Value ROFR in Factory Devise
An industrialist’s will devises a factory to nephew Orlando while granting supplier Swift Plastics a right of first refusal at the book value shown on Swift’s internal ledgers. Orlando later receives a market-price offer from Crown Fabrication and must keep it open for ninety days. Swift Plastics timely elects to match at the lower book value. The court upholds the right because the price formula rests on an objective accounting method and the ninety-day period aligns with commercial norms for industrial assets.
Joint Tenancy Lease Option Dispute
Raymond and Hazel hold Blackacre as joint tenants. Raymond leases the property to tenant Boswell and grants Boswell a right of first refusal to purchase if Raymond ever offers the land for sale. After Raymond dies, Hazel seeks to quiet title free of the right. The court holds that the right of first refusal survives the joint tenancy severance and remains enforceable against Hazel because the lease disclosed the preemptive right and the terms were reasonable at creation.
Tenhet v. Boswell(1976) 18 Cal. 3d 150, 155, 133 Cal. Rptr. 10, 554 P.2d 330
Commercial Option and Perpetuities Challenge
Symphony Space sells a theater to Pergola Properties subject to a purchase option exercisable decades later at a fixed price. Pergola attempts to exercise the option after the property value has risen sharply. Symphony Space argues the option violates the rule against perpetuities. The court applies the rule to commercial options and invalidates the remote exercise because the option created an interest that might vest too remotely, rendering the preemptive right unenforceable.
The Symphony Space, Inc. v. Pergola Properties, Inc.669 N.E.2d 799 (1996)
Land Reform and Preemptive Purchase
Hawaii enacts a statute allowing the housing authority to condemn leased residential lots and sell the fee to the occupying tenants. Landowners challenge the scheme as an unconstitutional taking that overrides their retained rights. The Court upholds the statute because the redistribution serves a legitimate public purpose of correcting oligopolistic land ownership and the preemptive transfer to tenants is rationally related to that goal.
Hawai`i Housing Authority v. Midkiff467 U.S. 229, 233-234 (1984)
Common questions
Frequently Asked
4
When does a right of first refusal in a will avoid classification as a restraint on alienation?+
The right avoids restraint classification when its price term and exercise period are reasonable both at the time of the donative transfer and as applied. Reasonableness is measured by whether the price reflects an objective benchmark such as book value or a third-party offer and whether the period allows practical due diligence without indefinite delay.
Does a fixed historical valuation in a right of first refusal remain reasonable after the property appreciates?+
A fixed historical valuation becomes unreasonable once market value diverges substantially from the formula, because the holder can then acquire the interest at a deep discount unrelated to current worth. The resulting windfall and chilling effect on third-party offers convert the right into a disabling restraint.
May a right of first refusal include an approval requirement for the buyer?+
An additional buyer-approval power exceeds the standard right of first refusal and imposes an unreasonable restraint when it allows the holder to veto purchasers for reasons unrelated to price. The added layer deters third-party offers and effectively disables alienation of the interest.
How long may the exercise period for a right of first refusal last without becoming unreasonable?+
Periods of thirty to ninety days are routinely upheld when they permit due diligence and financing without exposing the seller to prolonged market risk. A one-year period or longer creates uncertainty that deters buyers and renders the right an unreasonable restraint.
, 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....…
right
, 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…
(which had, at that time, become an option to purchase), the plaintiff relinquished any
right
to challenge the validity of the defendant's
preemptive
right
to the property. See, e.g.,…
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