WHAT IS A RIGHT OF FIRST REFUSAL TO PURCHASE?
A Right of First Refusal to Purchase is a lease clause that gives the tenant the right to have the first opportunity to buy a property or space at the same price and on the same terms and conditions as those contained in a third party offer that the owner has expressed a willingness to accept, or at a set price the owner has agreed to accept upon a decision to sell in the future.
The Right of First Refusal to Purchase is typically initiated when the owner or landlord receives an offer to purchase the property or space at terms that it would accept; or at a specific date the landlord has agreed to in the lease. The tenant who has the First Right of Refusal to Purchase typically then has a specific amount of time to either match or accept the offer to purchase the property or space, or to decline or waive the Right of First Refusal to Purchase.
If the tenant waives the right or doesn’t proceed in the timeframe agreed upon, the owner is free to move forward with the other buyer to sell the property or to market the property to the public, depending on how the Right of First Refusal to Purchase is structured.
If the tenant accepts the Right of First Refusal to Purchase, the Tenant is then obligated to proceed to purchase the property in the agreed upon or similar timeline. Many owners will require the Tenant to provide proof of their ability to receive financing through a pre-approval letter from a qualified lender or proof of available funds to ensure the tenant can complete the sale.
Many owners will also require the tenant to make an Earnest Money deposit at the time they provide notice to accept the option or right to purchase the property.