Right of first refusal in a lease: what the tenant gets and what the owner gives up
A tenant who loves a rental sometimes asks for a promise: if you ever sell, let me have the first shot. That promise, written into a lease, is a right of first refusal. It can be a fair deal for both sides, but a vague clause causes trouble the day a real buyer shows up.
How it works
The owner keeps full control over whether to sell. Nothing happens until the owner decides to sell and gets an offer that fits the clause, usually called a bona fide third-party offer. The owner then sends the tenant written notice with the price and terms. The tenant has a fixed window, such as 10, 15, or 30 days, to agree to buy on those same terms. If the tenant says no or misses the deadline, the owner can sell to the outside buyer on the terms offered.
Two related clauses get confused with this one. A right of first offer requires the owner to offer the property to the tenant before marketing it, and the tenant names a price or passes. An option to purchase gives the tenant the right to buy at a set price during a set period, whether the owner wants to sell or not. Our guide to rent-to-own and lease options covers that second type.
What the clause should say
| Term | Why it matters |
|---|---|
| What triggers it | A signed offer from an unrelated buyer, a listing, or any decision to sell. Pick one. |
| Excluded transfers | Transfers to a spouse, children, a trust, or the owner's own LLC, and foreclosure, are often carved out. |
| Notice | How the owner tells the tenant, and what the notice must include (price, financing, closing date, contingencies). |
| Response time | How many days the tenant has to accept in writing, and how long to close after that. |
| Matching | Whether the tenant must match every term or only the price, and how non-cash terms are valued. |
| Duration | Whether the right lasts only during the original term, or through renewals and month-to-month periods. |
| Assignment | Whether the tenant can transfer the right to someone else. Most owners say no. |
Sample wording for a simple version: "If, during the term of this Lease, Landlord receives a bona fide written offer from an unrelated third party to purchase the Premises that Landlord is willing to accept, Landlord shall deliver a copy of the offer to Tenant. Tenant shall have 15 days after delivery to agree in writing to purchase the Premises on the same price and terms. If Tenant does not accept within that period, Landlord may sell to the third party on substantially the same terms."
The phrase "substantially the same terms" matters. If the outside deal later falls apart and the owner drops the price, a well-written clause makes the owner go back to the tenant first.
The trade-off for owners
Buyers know a tenant can match their offer. Some will not spend money on inspections and appraisals for a deal they might lose, which can mean fewer offers and a lower price. Owners who agree to a right of first refusal sometimes ask for higher rent in return, or limit the right to the first year, or exclude sales of the whole building when the tenant rents one unit.
Owners should also remember that a sale does not usually end the lease. A buyer generally takes the property subject to the existing lease. Our guide on what happens when the landlord sells explains that rule.
Get it in writing and consider recording it
Rights in real estate generally have to be in writing to be enforced, so an oral promise to "give you first dibs" is risky for a tenant. A signed lease clause is the minimum. For extra protection, some tenants record a short memorandum of lease in the county land records so that any buyer is on notice of the right.
When the law gives tenants a similar right
A few places create a statutory version. In Washington, D.C., the Tenant Opportunity to Purchase Act requires many owners to give tenants an opportunity to purchase, at a price and terms that represent a bona fide offer of sale, before selling (D.C. Code 42-3404.02). Exemptions and procedures vary by building type, so D.C. owners should read the current rules before listing. Most states have no such law, which leaves it to the lease.