Glossary of Terms

Right of First Refusal 2019-03-08 08:00:00

Right of First Refusal

The right of first refusal is the contractual right, but not obligation, to enter into a buy-sell transaction with the owner of an asset before any other third party. In commercial real estate, the right of first refusal allows an interested party to buy a property before the seller negotiates any other offer. In the scenario that the party with the right of refusal declines to buy, the seller is then free to negotiate and sell with other interested parties.

Depending on the language of the contract, the right of first refusal may give financial incentives to buyers, as it may limit the effects of a bidding war. On the contrary, a buyer may have to transact at a moment’s notice.