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I can see the same question in everyone's eyes when someone talks about "right of first refusal" in real estate: What does this mean for me, and should I care? Let me explain this in a way that makes sense for you, because most people don't know that ROFR agreements are more common than they think.
Having a right of first refusal is like knowing you'll be first in line. If you love the house you're renting but are worried that the owner might sell it without telling you, a ROFR in your lease means you get to buy it before anyone else knows it's for sale. If you want to buy a house that isn't for sale yet, you can negotiate a ROFR with the owner. This gives you the chance to act first when they decide to sell.
The idea is easy to understand, but making it happen and dealing with the legal issues can be very hard. That's why it's important to know how ROFR agreements work in 2026 and what rights and responsibilities they give you as a buyer, seller, or tenant.
Here's what people misunderstand most often: a right of first refusal isn't a casual promise or informal understanding. It's a legally binding contractual right that creates enforceable obligations for both parties.
When you have a ROFR, you hold a specific property right that must be honored before the property can be sold to anyone else. According to the California Lawyers Association's July 2025 analysis, courts treat ROFR violations seriously, and damages can include either monetary compensation or specific performance requiring the original ROFR holder to get their chance to purchase.
A properly structured ROFR typically includes these elements:
Priority Purchase Right: You get the first opportunity to make an offer or match any legitimate offer the seller receives. The seller legally cannot accept another buyer's offer until your ROFR rights are satisfied.
Specified Response Period: The agreement establishes a specific timeframe - commonly 14 to 90 days according to Local Housing Solutions research - during which you must decide whether to exercise your purchase right.
Price Determination Method: Most ROFR agreements either set a predetermined price, require you to match a third-party offer, or establish a formula for calculating fair market value.
Notice Requirements: The property owner must notify you when they're ready to sell, typically in writing with specific details about any competing offers or proposed terms.
Case law shows that courts strictly follow ROFR rules. In the California case Pellandini v. Valadao, the court upheld a right of first refusal (ROFR) clause in a trust settlement agreement between property co-owners. In the Campbell case, two men bought a ranch together and signed a ROFR agreement years later. When one partner wanted to sell, the court enforced that agreement. Maryland real estate lawyers at Lusk Law say that for a ROFR to work, the agreement must clearly define what a triggering event is (usually a real offer from a third party), how to give notice, and when to use it.
One of the biggest changes in the ROFR landscape over the past decade is that certain jurisdictions have moved from optional ROFR clauses to mandatory requirements - particularly for rental property tenants.
Maryland law requires that landlords planning to sell properties with 3 or fewer residential rental units must provide current tenants the first opportunity to make an offer to purchase. This isn't optional or negotiable - it's a legal requirement enforced by the state's Department of Housing and Community Development.
The Maryland system includes a dedicated online portal where landlords complete required ROFR notification forms. Tenants can work with real estate agents or access HUD-approved housing counseling programs for assistance with the purchase process.
Baltimore City goes even further with Subtitle 6 of Article 13 of the Baltimore City Code, which establishes specific timelines and procedures. According to Lusk Law's analysis of Baltimore ROFR regulations:
If you're selling rental property in Baltimore and fail to follow these procedures, you could face legal challenges that delay or derail your sale entirely.
The Tenant Opportunity to Purchase Act (TOPA) in Washington, D.C. is probably the most comprehensive mandatory ROFR system in the country. TOPA has been around for more than 30 years and lets tenant groups buy their apartment building when it goes up for sale.
However, MassLandlords' research from November 2024 shows that TOPA implementation has been very difficult. The DC Association of REALTORS® says that in the 30 years that TOPA has been in place, not a single group of renters has been able to buy their building. Instead, the law has made it possible for attorney Andrew McGuire to build his whole practice around "TOPA-chasing," which means helping tenants accept cash payments to give their rights back to owners. He thinks this is a $100 million a year business.
According to Robert DeFalco Realty's July 2025 analysis, progressive cities including San Francisco, Cambridge, and Takoma Park have implemented various forms of tenant ROFR programs. Each has different qualification requirements and procedures, but the trend is toward expanding tenant protection through ROFR mechanisms, particularly as gentrification concerns grow.
This means if you own rental property, you need to check your local and state laws before listing—ignorance of mandatory ROFR requirements won't protect you from legal consequences.
People constantly confuse Right of First Refusal (ROFR) with Right of First Offer (ROFO), but these create substantially different rights and obligations. Understanding this distinction matters if you're negotiating either type of agreement.
With ROFR, you have the right to match any legitimate offer the seller receives from a third party. Here's how it works:
The key advantage: you know exactly what offer you need to match. The disadvantage: someone else essentially did the work of determining market value and negotiating terms.
With ROFO, according to the National Association of REALTORS® analysis, you must make your offer first, but the seller can then consider other offers. The process works differently:
The advantage: you set the opening terms. The disadvantage: the seller can shop your offer and potentially get better terms from others.
According to California Lawyers Association analysis, ROFO agreements are less restrictive on sellers because they don't require matching a third-party offer - they simply require giving the ROFO holder first shot at making an offer.
Here's where people run into trouble: vague or incomplete ROFR agreements create ambiguity that leads to disputes and litigation. Working with an attorney to draft clear terms saves money and headaches later.
Based on analysis from Maryland real estate attorneys and California case law, effective ROFR agreements must clearly specify:
According to Peter Damrosch's analysis in the Yale Law Journal, ROFR disputes commonly arise from:
The more specific your ROFR agreement, the less likely these disputes arise. Don't rely on template language or generic forms - invest in proper legal review upfront.
The practical application of ROFR varies significantly between residential and commercial real estate contexts. Understanding these differences helps you negotiate appropriate terms for your situation.
In residential real estate, ROFR most commonly appears in:
Commercial real estate uses ROFR differently, according to CARR Real Estate Resources analysis:
According to Robert DeFalco Realty's July 2025 analysis, commercial ROFR agreements typically involve larger dollar amounts, more complex terms, and longer exercise periods than residential ROFR due to the higher stakes and more sophisticated parties involved.
The growth of mandatory and voluntary tenant ROFR programs represents one of the most significant housing policy trends of the past decade. Whether you're a landlord, tenant, or potential investor, understanding this movement matters.
According to Local Housing Solutions research published in July 2025, tenant ROFR programs serve two primary policy goals:
Based on Local Housing Solutions analysis, most tenant ROFR programs include:
The experience with Washington DC's TOPA illustrates implementation difficulties. According to MassLandlords' November 2024 analysis of TOPA:
MassLandlords' analysis identifies a concerning effect in nonprofit property transfers: nonprofits are exempt from real estate taxes and typically pay only a fraction of requested payments in lieu of taxes (PILOT). In Boston, nonprofits pay only 23% of requested PILOTs. When ROFR programs redirect property ownership to tax-exempt entities, it reduces municipal tax bases and increases the burden on remaining taxpayers.
How price gets determined in a ROFR agreement significantly impacts both parties' positions. Different pricing approaches create different strategic considerations.
The most common ROFR structure requires the right holder to match any bona fide third-party offer. According to California Lawyers Association analysis:
Some ROFR agreements establish price calculation methods in advance:
Peter Damrosch's Yale Law Journal analysis notes that predetermined pricing mechanisms work best when they use objective, verifiable metrics rather than requiring future agreement between parties.
Some agreements simply require ROFR exercise at "fair market value" determined at the time of sale. This approach creates challenges:
According to Maryland real estate attorneys, the more specific the agreement about valuation timing, methodology, and dispute resolution, the smoother the ROFR exercise process.
When negotiating ROFR pricing terms, consider:
Before entering a ROFR agreement, understanding the practical advantages and disadvantages from each perspective helps inform negotiation strategy.
Based on analysis from Robert DeFalco Realty and National Association of REALTORS® research:
Given the legal complexity and potential financial stakes, DIY ROFR agreements are recipes for disaster. Here's why professional help matters and what type of expertise you need.
According to Maryland and California real estate attorneys, you absolutely need legal counsel when:
Real estate agents provide different but equally important expertise:
For significant ROFR situations - particularly commercial properties, high-value residences, or complex multi-party arrangements - you want both attorney and real estate agent representation. They serve complementary roles: attorneys ensure legal compliance and protection; agents provide market intelligence and transactional expertise.
According to the National Association of REALTORS®, attempting to navigate ROFR situations without professional guidance frequently results in missed opportunities, legal disputes, or unfavorable outcomes that cost far more than professional fees would have.
Based on case law analysis and real estate attorney experience, here are the most common ROFR mistakes and how to prevent them:
Mistake #1: Failing to Provide Proper Notice
Many ROFR disputes arise because owners didn't follow notice procedures exactly. Solution: Have your attorney review notice requirements and approve your notice before sending.
Mistake #2: Accepting Offers During ROFR Exercise Period
Even if you're certain the ROFR holder won't exercise, accepting another offer before their deadline passes exposes you to legal liability. Solution: Wait. Let the exercise period fully expire.
Mistake #3: Not Exempting Certain Transfers
Many owners want to transfer property to family members, into LLCs, or for estate planning without triggering ROFR. Solution: Explicitly list exempt transfer types in the original ROFR agreement.
Mistake #4: Creating Perpetual ROFR
ROFR agreements without expiration dates can complicate property ownership and transfers indefinitely. Solution: Include reasonable expiration provisions (commonly 5-10 years for rental situations).
Mistake #1: Missing Response Deadlines
Courts enforce ROFR exercise periods strictly. Miss your deadline by even a day and you lose your rights. Solution: Calendar ROFR deadlines immediately upon receiving notice and set multiple reminders.
Mistake #2: Not Securing Financing First
Exercising ROFR without confirming financing capability creates problems if you can't close. Solution: Get mortgage preapproval before exercising ROFR or include appropriate financing contingencies.
Mistake #3: Assuming ROFR Equals Purchase Obligation
Some people think ROFR forces the owner to sell to them. It doesn't - it just gives you first shot if they sell. Solution: Understand ROFR gives you opportunity, not guarantee.
Mistake #4: Ignoring Property Condition
Just because you have ROFR doesn't mean you should exercise it without proper due diligence. Solution: Conduct inspections and evaluate condition before committing.
Several trends are shaping how right of first refusal will operate in coming years:
Expansion of Mandatory Tenant ROFR: More jurisdictions are considering tenant protection through mandatory ROFR, particularly in high-cost urban markets facing affordability crises.
Technology Integration: Digital notice systems and online ROFR registries (like Maryland's portal) are making compliance and tracking easier.
Commercial ROFR Growth: As remote work reshapes office markets, businesses are increasingly negotiating ROFR to secure strategic locations and protect against landlord changes.
Family Wealth Transfer: Baby boomer generation property transfers are driving increased use of ROFR in family estate planning.
Litigation Clarity: As more ROFR cases reach courts, clearer precedents are emerging about proper procedures, valuation methods, and enforcement mechanisms.
If one side breaks a ROFR agreement, the other side can sue for damages. Most of the time, there are two types of remedies: money damages and specific performance. When a court orders specific performance, it means that the ROFR holder must buy the property on the same terms as before. This means that any sale to someone else that wasn't right is no longer valid. If the ROFR holder can show that they were ready, willing, and able to buy and would have done so if they had been given the chance, they can use this remedy. When specific performance isn't possible, like when the property has already been sold and given to a third party who didn't know about the ROFR violation, the ROFR holder gets paid for their loss in money. The amount of money damages in California is usually the difference between the property's fair market value and the price the ROFR holder could have paid for it. People have fewer disagreements that go to court when they have clear, specific agreements.
Yes, for sure. Tenants often put ROFR clauses in their leases. In some places, like Maryland (for properties with three or fewer units), Baltimore City, and Washington DC, ROFR is required by law. The National Association of REALTORS® says that landlords often add ROFR clauses to their leases to get good long-term tenants, especially when the market is a buyer's market. If the landlord wants to sell, the ROFR gives tenants the first chance to buy the rental. This gives tenants more time to get a loan and do their research, so they don't have to move out right away. In lease-based ROFR cases, the lease usually says how much notice the landlord has to give, how long the tenant has to decide, and how the price will be set (for example, by matching a third-party offer or using a different method). Tenants should check that their lease clearly states these terms and that they are aware of the laws in their area regarding mandatory ROFR rights.
Yes, you can end a ROFR agreement through a process called "extinguishment." Rocket Mortgage and lawyers say that extinguishment can happen in two main ways: the ROFR holder can say they don't want to buy when they have the chance, or they can just not respond within the time frame set by the agreement. Once the ROFR is no longer in effect for that sale, the property owner can sell it to other buyers. But if the original ROFR agreement was written in a certain way, ending it for one sale might not mean it's over for good. For instance, a tenant's lease might have ROFR that kicks in every time the landlord thinks about selling while the lease is still in effect. If you don't use the ROFR once, that doesn't mean it won't be there for future sales. A ROFR agreement can only be ended for good if both parties sign a formal release or the agreement ends according to its original terms. Real estate lawyers in Maryland and California say that any end to a ROFR should be in writing so that there are no more arguments about whether the right still exists.
Depending on the situation and the talks, the length of ROFR can be very different. Local Housing Solutions says that tenant ROFR programs at the city level usually have notice periods that range from a few months to a few years. Tenant groups need more time to plan and get money, which is why. For commercial leases, ROFR agreements usually last for the whole lease term, which is usually 5 to 10 years or more, as well as any renewal periods. If two people own something together, ROFR can last as long as they own it together. But many contracts have expiration clauses that kick in after 10 to 20 years. Family property ROFR agreements can be very different from each other. Some estate planning documents say that ROFR lasts for as long as the family member is alive, while others say it only lasts for a certain amount of time, like 5 to 10 years. The time you have to use ROFR also changes. Local Housing Solutions found that notice periods usually last between 14 and 90 days. However, this can change depending on the property and the area. Commercial properties usually have longer exercise periods (60 to 90 days) than residential properties (14 to 45 days) because they need more complicated due diligence and financing. When you talk about ROFR terms, you should think about whether you want a set amount of time or one that is linked to other things, like lease terms or periods of ownership.
Robert DeFalco Realty's report from July 2025 says that the effect on property value goes both ways. ROFR can make properties less marketable because it makes deals less certain. Some buyers don't even look at properties with ROFR because they don't want to spend time and money on due diligence only to have the ROFR holder match their offer. Prices can stay low because there aren't as many people who want to buy. Some buyers, especially those who need to close by a certain date, can't stand the timing problems that happen because of the delays in the exercise period. But ROFR can also make the market more competitive, which can cause prices to go up. A third-party buyer might make a better first offer if they know that someone else has a ROFR. This could make the ROFR holder back down. Also, knowing who the buyer is ahead of time (the ROFR holder) can make sales easier by lowering marketing costs and giving you a backup plan if the market isn't doing well. The terms of the sale will decide how much value ROFR holders lose. If you agreed on a fixed price in a market that was going up, you might be able to buy property for less than its market value. If you have to match other buyers' offers, though, you might have to pay the full market price or even more if other buyers are very interested. Short-term ROFR with reasonable exercise periods doesn't have a big effect on the market as a whole, but long-term perpetual ROFR can make properties less liquid and lower their value.
The terms of the agreement will say if ROFR can be assigned. Many ROFR agreements have "anti-assignment" clauses that say you can't give the right to someone else without the property owner's permission. The California Lawyers Association says that courts usually uphold these anti-assignment clauses because property owners really want to know who the ROFR holder is. For instance, a landlord might not like it if a long-time, trusted tenant gives the right to an investor or someone else they don't know. On the other hand, some ROFR agreements do let you give up your rights, especially in business settings. In business, ROFR might let you give the rights to companies that are related to you, companies that come after you, or third parties that have been approved. The Washington, D.C. TOPA experience shows how assignments work in real life. Tenants often give property owners back their collective ROFR rights in exchange for cash. This creates a whole market for these jobs. Make sure the original agreement says you can give your ROFR to someone else if you want to. If you own property and give ROFR, think about whether you want to limit assignment and what rights you want if assignment is allowed. If you try to give someone ROFR without their permission, it might not work and could lead to legal problems for everyone.
The main difference is when the offer has to be matched and what it is. With Right of First Refusal (ROFR), the owner of the property puts it up for sale and gets an offer from a third party first. After that, they have to give that offer to the ROFR holder, who can decide whether or not to accept it. The ROFR holder knows exactly what to do because they can see that the market is really interested. The National Association of REALTORS® says that this helps the ROFR holder learn more about the market. But it might also make it harder to negotiate because someone else has already set the terms. With Right of First Offer (ROFO), the order is reversed. The owner of the property must first offer it to the ROFO holder on terms that the owner suggests. The person who has the ROFO can either accept the offer, turn it down, or make a counter-offer with different terms. The owner can only sell to other people if the ROFO holder says no or the talks fall apart. Many agreements say that if the owner gets a better offer from someone else than the ROFO holder's offer, the owner has to go back to the ROFO holder and negotiate again. The holder of a ROFO gets the first chance to set terms, but they don't get as much information about the market. Property owners don't have to follow as many rules when they market to other people if they turn down a ROFO offer. ROFR, on the other hand, says that they have to accept offers that are the same.
ROFR clauses are common in divorce agreements that let one spouse keep the house. Robert DeFalco Realty did a case study and found that these agreements usually give the non-custodial parent the right of first refusal (ROFR) if the custodial parent wants to sell the house within a certain amount of time (usually 5–10 years). The reason is to stay close to the kids and keep the family together. For instance, Sarah gets to keep the family home in a divorce settlement that gives her ex-husband Michael ROFR for ten years. Someone else makes Sarah an offer five years later. Michael can choose to match that offer and buy the house, which will keep him in the same neighborhood and close to their kids. In real life, ROFR that has to do with divorce has to think about a lot of things. The exercise period should be long enough to be useful, but not so long that it makes it impossible for the custodial parent to do anything else. The pricing system should be clear (matching offers vs. set formulas), the ex-spouse who holds the ROFR should be able to pay, and there should be clear ways to enforce the agreement because divorce relationships can be stressful. Family law lawyers say that when you're negotiating a divorce, it's very important to be very clear about these terms. This is because divorce decrees that don't make ROFR clauses clear often lead to lawsuits after the divorce.
Most of the time, ROFR agreements don't stop property owners from refinancing their mortgages because refinancing isn't a "sale" that would give them ROFR rights. Maryland real estate lawyers say that some situations, however, make things more difficult. Some ROFR agreements use vague phrases like "transfer of interest" or "change in ownership" to cover any situation in which the property is temporarily given to a lender or the ownership structure changes during a refinance. This is very important for rental properties owned by LLCs or partnerships because refinancing could mean changing the way the property is owned. When you refinance, lenders will also see the recorded ROFR agreement, which is something else to think about. They might need to check that refinancing doesn't start ROFR rights or ask the ROFR holder to write down their agreement. Property owners should make sure that their ROFR agreements make it clear that refinancing, changing a mortgage, and other similar financial transactions do not give them ROFR rights. This will make it easier for them to refinance without any problems. Also, transfers into living trusts, setting up an LLC to protect assets, and other estate planning moves should not be included. When you talk to your lawyer about ROFR terms, make sure to include language that lets you do normal business and financial things without having to follow ROFR rules.
Yes, for sure. The National Association of REALTORS® even says that this is one of the best ways to use ROFR. You can talk to the owner about a ROFR agreement if you want to buy a property but it's not for sale right now. This will help you buy it later. They might sell their property sooner than they would have otherwise if they know they have a buyer who is interested. You can be first in line without having to buy right away. You could get around this by offering something of value in exchange for ROFR. Tenants might agree to a longer lease or a little more rent in exchange for the right of first refusal (ROFR). You might have to pay a small fee for the option itself if you aren't renting. This is similar to buying the right in an option contract. The ROFR agreement should say how long the ROFR lasts, how long you have to decide once it is triggered, and how the price will be set. When properties aren't for sale, it's usually better to use pre-set price formulas or fair market value determination instead of matching future offers. This is because there isn't any market information available right away. Get a lawyer to write the ROFR agreement as a separate contract. A lot of property owners will probably say no. They might not want any limits on how flexible future sales can be, but some people think the deal is good for both sides.
Most of the time, the rules for co-op apartments include ROFR clauses. These let the corporation or co-op board buy any unit before it is sold to someone else. The California Lawyers Association says that this is not the same as a regular ROFR because the co-op board speaks for all the residents, not just one person. When a co-op shareholder wants to sell their unit, they usually have to tell the board and give them a certain amount of time to decide whether to buy it themselves (which usually means giving shares to other shareholders) or let the sale go through to the person who wants to buy it. Some co-op ROFR rules also let the board say no to buyers without having to buy the unit themselves. This is like combining ROFR and the right to approve the board. This makes it harder to sell co-ops than condos, which usually don't have ROFR. When you buy a co-op, you also need to think about some things that are unique to that type of property. Boards don't use ROFR very often because it costs a lot of money to buy units, which they get from either cash reserves or assessments on current shareholders. But boards do use ROFR to stop sales that they think would hurt the building, like to buyers who want to make big changes or to investors who want to sell the unit quickly. Remember that board ROFR and approval rights can make a co-op deal less certain and take longer to close.
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