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Is the Right of First Refusal an Option in Your Real Estate Deal?

On Behalf of | Dec 6, 2021 | Real Estate

When you’re in business for yourself, there’s a lot to protect. If you’ve managed to secure a good location that’s right for your needs and convenient for your customer base, it can really hurt to suddenly be uprooted because your landlord decides to sell.

That’s why you may want to see if you can work the right of first refusal (ROFR) into your lease.

What’s a right of first refusal?

In essence, this is a clause that lets you call “dibs” on the property you’re currently renting if the owner decides to sell. It can work in several different ways. For example:

  • The owner receives an offer from an interested buyer. They weren’t looking to sell, but the offer was too good to pass up. Because you have the ROFR clause, the owner has to offer you the opportunity to buy the property at the same price. There’s generally a strict time limit on how long you have to decide, after which the landlord is free to do as they please.
  • The owner decides to sell on the open market. Before they can list the property, your ROFR gives you the right to buy the property at a predetermined price. (Usually, the method for calculating the price is set when you negotiate the contract.) If you can’t do it in the agreed-upon time or don’t want to buy it, then the owner is free to take any bid.

A ROFR clause isn’t always a great deal for either party, so they’re something to be entered into with caution. If you’re thinking about asking for this clause in your commercial lease, make sure that you consider all the possible pros and cons.

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