Glossary / Lease terms and deal stages
Also known as: ROFR, first refusal right
A contractual right that lets the holder, often an existing tenant, match a deal the owner has negotiated with a third party, on the same terms, before the owner can complete that deal with the third party.
Wikipedia defines a right of first refusal as a contractual right that gives its holder the option to enter a transaction with the owner "according to specified terms, before the owner is entitled to enter into that transaction with a third party." In leasing it often attaches to expansion space next to an existing tenant, or to a sale of the building.
The landlord markets the space, negotiates terms with an outside party, then must present those terms to the holder. Occupier explains that the holder can accept or decline but cannot modify the terms, and says a typical response window is 5 to 10 days. This is general information, not legal advice. Rules vary by state and by contract, so have the actual lease language reviewed.
If you represent a prospect for space covered by another tenant's ROFR, the deal you negotiated can go to the existing tenant instead. Kleiner Law Group notes that a ROFR can discourage outside parties because they may hesitate to invest in a deal another party can step into. Whether you are owed anything if the holder matches depends on your Commission agreement and, for a listing broker, the Listing agreement.
A ROFR also adds a waiting period between agreed terms and a signed lease, since the landlord cannot sign with your client until the holder has passed or the response window has run. That pushes back lease execution and any commission payment tied to it.
Before spending time on a deal, ask the landlord whether any existing tenant holds a ROFR on the space, and get the answer in writing.
