Right of First Refusal Agreement
Right of First Refusal Generator
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Signature Requirements
E-Signature Valid
Right of first refusal agreements are generally valid with electronic signatures. If recording with the county recorder is required, wet ink signatures and notarization may be necessary per local recording requirements.
Sample Right of First Refusal Generated by Legal Tank
Right of First Refusal
ROFR Grant & Trigger Events
This Right of First Refusal Agreement ("Agreement") is entered into as of [____________] by and between [Owner Name] ("Owner") and [Holder Name] ("Holder"). In consideration of [____________] (the "Consideration"), the receipt and adequacy of which Owner hereby acknowledges, Owner hereby grants to Holder the right of first refusal (the "ROFR") to purchase the real property located at [____________], more particularly described in Exhibit A hereto, together with all improvements and appurtenances thereon (the "Property"), on the terms and subject to the conditions set forth in this Agreement. The ROFR is a right of first offer and first refusal, meaning that Owner must offer the Property to Holder before accepting any third-party offer and must also offer Holder the right to match any bona fide third-party offer before accepting it.
The ROFR shall be triggered upon any of the following events (each, a "Trigger Event"): (a) Owner's receipt of a bona fide written offer from a third party to purchase all or any portion of the Property (a "Third-Party Offer"); (b) Owner's intention to list the Property for sale or to actively solicit offers from third parties; or (c) any proposed transfer of the Property, whether by sale, exchange, ground lease, installment sale contract, or any other conveyance, whether or not for consideration, except for the Excluded Transfers identified in Section 1.3. The ROFR shall not apply to [transfers to Owner's wholly owned subsidiaries or affiliates / transfers by devise or descent to Owner's heirs / transfers in connection with a foreclosure or deed-in-lieu of foreclosure / other excluded transfers as identified in Section 1.3] (collectively, "Excluded Transfers").
Notice & Matching Period
Upon a Trigger Event, Owner shall promptly and in any event within [____] days deliver written notice to Holder (the "ROFR Notice"), which shall include: (a) a complete copy of any Third-Party Offer, including all material terms and conditions; (b) the proposed purchase price; (c) the proposed closing date; (d) the identity of the proposed transferee; (e) all financing terms, contingencies, and other material terms of the proposed transaction; and (f) a statement that Owner is offering Holder the right to purchase the Property on the same terms and conditions. If there is no Third-Party Offer (i.e., Owner intends to sell without first receiving a third-party offer), the ROFR Notice shall specify the price, terms, and conditions at which Owner is willing to sell the Property.
Holder shall have [____] business days following receipt of the ROFR Notice (the "Matching Period") to elect, by written notice to Owner, to purchase the Property on the same terms and conditions as the Third-Party Offer or the terms proposed in the ROFR Notice, as applicable. Time is of the essence with respect to Holder's election. If Holder fails to deliver a written election to purchase within the Matching Period, the ROFR shall be deemed waived with respect to the specific transaction described in the ROFR Notice, and Owner may consummate the transaction with the proposed transferee on terms no more favorable than those described in the ROFR Notice within [____] days following the expiration of the Matching Period. If Owner does not consummate the transaction within that period, or if Owner proposes a transaction on materially different or more favorable terms, the ROFR shall be reinstated in full.
Exercise & Closing
If Holder timely elects to exercise the ROFR, the Parties shall execute a purchase and sale agreement within [____] days of Holder's election, incorporating all material terms of the Third-Party Offer or the ROFR Notice, as applicable, and the standard terms set forth in Exhibit B. Holder shall not be required to assume any term of the Third-Party Offer that requires personal services of or representations and warranties by the third-party offeror that are incapable of performance by Holder. Closing shall occur within [____] days following execution of the purchase and sale agreement or the date specified in the Third-Party Offer, whichever is earlier, unless the Parties agree otherwise in writing. Holder shall deposit earnest money in the amount specified in the Third-Party Offer within [____] days of executing the purchase and sale agreement.
At closing, Owner shall convey good and marketable fee simple title to the Property by [general warranty / special warranty / grant] deed, free and clear of all liens and encumbrances other than those existing as of the date of the ROFR Notice and accepted by Holder. Owner shall deliver title in the same condition as that offered to the third party in the Third-Party Offer. If title is not in the required condition at closing, Holder may: (a) proceed with closing and accept title as-is with a price reduction reflecting the cost to cure title defects; (b) waive the title defect and proceed to closing; or (c) terminate the purchase and sale agreement and recover all earnest money. Owner shall pay all transfer taxes, recording fees, title insurance premiums, and closing costs customarily paid by sellers in [____________] County, [State].
Duration & Recording
The ROFR shall be effective for a period of [____] years from the date of this Agreement (the "ROFR Period"), unless earlier terminated by written agreement of the Parties or by Holder's failure to exercise the ROFR following a Trigger Event as provided herein. Upon expiration of the ROFR Period, the ROFR and all rights of Holder under this Agreement shall terminate automatically and without further action. The ROFR shall run with the land and shall be binding upon Owner and Owner's heirs, successors, and assigns and shall benefit Holder and Holder's successors and assigns [to the extent expressly provided herein / only to Holder personally, the ROFR being non-transferable].
The Parties agree that a memorandum of this Agreement shall be recorded in the official records of [____________] County, [State], within [____] days of execution, giving constructive notice to all subsequent purchasers and encumbrancers of the Property of the existence and terms of the ROFR. The memorandum shall be in the form attached hereto as Exhibit C. Owner agrees not to convey the Property to any third party unless such third party first acknowledges in writing the existence of this Agreement and the ROFR and agrees to be bound thereby as a condition of Owner's obligation to convey. Upon expiration or termination of the ROFR, Holder shall promptly execute and deliver to Owner a release of the recorded memorandum, which Owner may record to clear title.
What Is a Right of First Refusal?
A right of first refusal (ROFR) agreement grants one party the preferential right to enter into a transaction with the property or asset owner before the owner can complete a sale to a third party. When the owner receives a bona fide offer from an outside buyer, the ROFR holder must be notified and given the opportunity to match the offer terms within a specified period. If the holder matches, the sale proceeds with them; if they decline, the owner can sell to the third party on the offered terms.
Rights of first refusal are commonly used in real estate leases (giving tenants the first right to purchase the property), shareholder agreements (preventing dilution and maintaining ownership control), partnership agreements, franchise agreements, and intellectual property licenses. The ROFR protects the holder's interest in the asset without requiring them to commit to purchasing until a third-party offer materializes.
The mechanics of a ROFR are more complex than they appear. Key issues include what constitutes a triggering offer, how much time the holder has to match, whether the holder must match all terms or only the price, what happens if the third-party deal changes after the holder declines, and how the ROFR affects the marketability of the asset. Courts have significant case law interpreting these provisions, and ambiguities tend to be resolved in favor of the ROFR holder.
Legal Tank helps you draft ROFR agreements that clearly define the trigger events, matching procedures, and time frames to prevent the disputes that commonly arise with these complex instruments.
Why You Need a Right of First Refusal
Commercial tenants use ROFR provisions to ensure they have the first opportunity to purchase their leased space if the landlord decides to sell
Business partners and shareholders use ROFRs to maintain control over who joins the ownership group and prevent unwanted third-party investors
Neighboring property owners use ROFRs to control development and maintain the character of their area
Franchise agreements often include ROFRs giving the franchisor the right to repurchase the franchise location before it can be sold to a third party
Key Sections in a Right of First Refusal
Subject Property or Asset
Identify the property or asset subject to the ROFR with precision. For real estate, include the legal description. For business interests, specify the shares, membership interests, or assets covered. The scope of the ROFR determines which transactions trigger the holder's rights.
Triggering Events
Define what events trigger the ROFR, receipt of a bona fide third-party offer, the owner's intent to sell, or specific types of transfers. Exclude events that should not trigger the ROFR, such as transfers to family members, estate planning transfers, or corporate restructurings.
Notice and Matching Procedure
Specify how the owner must notify the ROFR holder (written notice with complete offer terms), how long the holder has to respond (typically 15 to 60 days), and what constitutes a valid match (same price, same terms, or price-only matching).
Exercise and Closing Terms
Define the closing timeline if the holder exercises the ROFR, the required earnest money or deposit, and the terms of the purchase agreement that will govern the transaction. These should mirror the third-party offer terms.
Duration and Termination
State the duration of the ROFR, whether it is perpetual, for a fixed term, or tied to another agreement (like a lease). Include conditions for termination and what happens to the ROFR upon transfer of the holder's interest.
Right of First Refusal Legal Requirements
ROFR agreements affecting real property must be in writing under the Statute of Frauds and should be recorded for protection against third-party buyers
The ROFR must be supported by consideration, it is often part of a larger transaction (lease, shareholder agreement) that provides the consideration
The owner must provide the ROFR holder with complete and accurate information about the third-party offer to properly trigger the matching right
Some jurisdictions impose a "rule against perpetuities" limitation on ROFRs, voiding those that could theoretically last beyond the perpetuities period
Corporate ROFRs in shareholder agreements must comply with applicable securities laws and corporate governance requirements
Common Right of First Refusal Mistakes to Avoid
Failing to define what constitutes a "bona fide" third-party offer, which creates disputes about whether the ROFR was properly triggered
Not specifying whether the holder must match all terms of the offer or only the price, non-price terms can be significant
Setting a response period that is too short for the holder to evaluate the offer and arrange financing
Omitting provisions for what happens if the third-party deal terms change after the holder declines, must the owner re-offer?
Not recording the ROFR for real estate transactions, which can allow a sale to a third party without notice
Creating ambiguity about which types of transfers trigger the ROFR and which are exempt
Frequently Asked Questions About Right of First Refusals
What is a right of first refusal?
How does a right of first refusal work in real estate?
What is the difference between a right of first refusal and an option to purchase?
How long does a right of first refusal last?
Is a right of first refusal legally binding?
Does a right of first refusal need to be recorded?
Can a right of first refusal be transferred?
What triggers a right of first refusal?
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