contracts

right of first refusal

A contractual right giving a person the opportunity to buy or lease property on the same terms as a bona fide offer from a third party before the owner accepts that offer. Unlike an option, the holder cannot force a sale at any time; the right is triggered only when the owner decides to sell. It often appears in leases, condo documents, and co-ownership agreements.

Exam tip: Option equals the right to buy at a set price within a set time; right of first refusal equals the right to match an offer when the owner chooses to sell.
Example: A tenant holds a right of first refusal; when the owner accepts a $500,000 offer from a stranger, the tenant may buy instead for $500,000.

1. A tenant holds a right of first refusal on the building. The owner receives a bona fide $2,000,000 third-party offer and wants to accept. What must the owner do?

Answer & explanation

Answer: B. A right of first refusal is triggered when the owner decides to sell and receives an acceptable offer; the holder may then match those terms. Unlike an option, it sets no fixed price and does not let the holder force a sale. Appraised value is not the measure unless the agreement says so.

Related terms & state variants

lease option contract optionee purchase agreement

Sources

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Last verified: 2026-10-23