CRE glossary
Right of first refusal (ROFR)
A right of first refusal (ROFR) gives the tenant the right to match any bona fide third-party offer for a defined space, typically the suite next door or another floor in the same building. When the landlord receives a third-party offer for the ROFR space, the landlord must present it to the tenant, who can match the terms within a defined window (usually 5–15 business days) and lease the space.
ROFR is the most common expansion right in office leases. It costs the landlord nothing during the lease term, the landlord can still market the space to anyone, but creates an option for the tenant when a serious offer comes in. Tenants love it because it locks down expansion at zero upfront cost; landlords accept it because it doesn't constrain the leasing process.
ROFR is weaker than a right of first offer (ROFO), which requires the landlord to come to the tenant first before marketing the space. ROFR only kicks in after a third-party makes an offer, by which point the price has been set by the third party, not negotiated by the tenant. For a hot expansion space the tenant strongly wants, push for ROFO; for a maybe-someday expansion, ROFR is fine.
Watch the trigger language. Bad ROFR clauses say 'first letter of intent received', meaning the first LOI starts the clock and tenant has 10 days to match. Better ROFR language says 'first lease offer' or 'first signed lease', giving the tenant time to evaluate without pressure. Also check whether the ROFR survives renewal options (it should) and whether it's tied to specific suite numbers (it usually is, protect your flexibility).
Example
- Tenant has ROFR on adjacent Suite 1900
- Landlord receives offer from third party
- $60/SF, 7-year term, $90/SF TI
- Landlord must offer same to tenant
- Tenant has 10 business days to match
- Tenant matches
- Leases Suite 1900 at $60/SF, 7-year term, $90/SF TI
- Tenant declines
- Landlord can lease to original third party only, same terms
Broker perspective
ROFRs cost nothing to ask for at LOI stage and often get included with no pushback. The broker's job is making sure the trigger language and time-to-match are tenant-friendly enough that the right is actually exercisable. A 5-business-day match window on a complex multi-floor expansion is too short. Negotiate to 10–15.
Frequently asked
People also ask
ROFR vs ROFO, which is better for the tenant?
ROFO. The tenant gets first crack before the price is set in the market. ROFR forces tenants to react to a price they didn't negotiate.
Does ROFR cost the tenant anything?
Usually nothing at LOI stage. If the landlord pushes back hard, sometimes a small premium on base rent, typically not worth it.
Can the landlord price-discriminate?
If the third-party offer is from a related party (landlord's affiliate or tenant), the ROFR should require true arms-length pricing. Specify in the lease.
What if I want to take less than the full ROFR space?
Most ROFR clauses are all-or-nothing. Negotiate a partial-take right if you want flexibility, landlord will resist because partial take complicates marketing.
Related terms
Right of first offer (ROFO)
Tenant's right to receive the first chance to lease a defined space, before the landlord markets it externally.
Letter of intent (LOI)
A non-binding outline of the major business terms, rent, term, TI, options, that becomes the basis for the binding lease.
Renewal option
Tenant's contractual right to extend the lease at predefined terms, usually exercised 9–12 months before expiration.
See right of first refusal (rofr) extracted from a real lease.
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