Glossary / Lease terms and deal stages
Also known as: ROFO, first offer right, first negotiation right
A lease or contract right that requires the owner to offer space or a property to the holder, often an existing tenant, before marketing it to anyone else. If the two sides do not agree within the set time, the owner can go to the market.
Under a right of first offer, the owner must come to the holder first, before marketing space or a property to outsiders. Occupier describes the landlord notifying the tenant with an offer for the available space, with a set time frame to accept or decline, and notes that if they cannot agree on terms, the space goes to market.
Wikipedia contrasts the two rights: a ROFR lets the holder accept or reject a specific transaction, while a ROFO "merely obliges the owner" to negotiate with the holder first. Kleiner Law Group adds that a ROFO preserves more outside interest than a ROFR but temporarily pauses the sales process. This is general information, not legal advice. Rules vary by state and by contract, so have the actual lease language reviewed.
For a landlord rep broker, a ROFO means covered space cannot be marketed until the holder has had its turn, which delays the start of your leasing effort on that space. If the holder takes it, there may be no outside deal, and whether you earn a fee on the holder's deal depends on your Listing agreement.
For a tenant rep broker whose client holds a ROFO, the right can create a deal without a competitive search. Cove says a ROFO gives the tenant the first chance to lease the space, usually on terms the landlord proposes or that the parties negotiate. How you are paid on that deal depends on your Commission agreement.
Track every ROFO in your listings and your clients' leases, including notice dates and response windows, so you know when space can actually move.
