A Right of First Refusal (ROFR) Clause is an optional clause that may be included in certain commercial leases which grants a tenant the first right to buy the property should the owner decide to sell.[1] Furthermore, should the owner receive an offer from a third party, the owner is required to first notify the tenant of the offer and give the tenant the opportunity to buy the property on the same terms as the third-party offer.[2] Below are important dos and don’ts to remember when navigating the addition of an ROFR clause in a commercial lease:
Dos
- DO make the timeframe for the tenant to accept the terms of sale reasonable but not significant. While a reasonable period of time must be provided to allow the tenant to determine whether they will reject the offer or accept the terms of the sale, too much of a decision window leaves room for a third-party buyer to rescind an offer to buy. A general rule of thumb is that 30 days is a reasonable timeframe for the tenant’s consideration.
- DO include an exclusion for intra-family or affiliate transfers in the ROFR clause. An ROFR clause is bound by the terms in the clause pursuant to standard principles of contract construction.[1] Therefore, including an exclusion in the clause for intra-family transfers or transfers to an affiliated entity ensures a transfer to an immediate family member or to a related, affiliated entity does not trigger the ROFR clause.
Don’ts
- DO NOT include ambiguous language in the ROFR clause. ROFR clauses should be clear, concise, and straight-forward so that all parties understand the rights and obligations. By way of example, introducing an intended ROFR clause by stating the tenant has the “first option to buy,” creates ambiguity as to whether the clause implicates an option contract enabling the tenant to purchase the property at any point of the lease.[1]
- DO NOT sell to another person without notifying the tenant with the ROFR. It is imperative that the provisions of an ROFR clause are closely followed and that a commercial tenant is given notice of any new offer received by the owner. Failure to notify the tenant could result in monetary damages and/or specific performance.[2]
Ultimately, while an ROFR clause is typically considered to be beneficial to the tenant, it can certainly be put to good use by a landlord or owner as the inclusion of an ROFR clause can be a powerful negotiating tool when establishing a lease.
[1] 1 Corbin on Pennsylvania Contracts § 11.02 (2025)
[2] Tri-Outdoor, Inc. v. Keyser, 277 A.3d 1142 (Pa. Super. 2022).
[1] Id.
[1] Citimortgage, Inc. v. Comini, 184 A.3d 996 (Pa. Super. 2018).
[2] Id.
