What is a 'right of first refusal'?

Right of First Refusal (ROFR) is a contractual right that obligates the property owner to offer the holder the opportunity to purchase at the same terms as any bona fide third-party offer before selling to that third party. Process: (1) Owner receives a third-party offer they want to accept; (2) Owner notifies the ROFR holder of the offer terms; (3) ROFR holder has a specified time (often 10-30 days) to match the offer; (4) If holder matches, they buy at those terms; (5) If holder declines or doesn't respond, owner can sell to the third party at those terms (or sometimes better terms). Distinguished from option: ROFR is triggered by a third-party offer; option is exercisable at the holder's discretion regardless of other offers. Common uses: tenant rights in leases (tenant gets first chance to buy if landlord decides to sell), partnership and shareholder agreements, real estate development deals. Strong tool for tenants and partners who want potential ownership without committing immediately. Must be carefully drafted to specify duration, terms, and procedures.