ROFR, or Right of First Refusal, is a different terminology for First Right of Refusal which is a right under an agreement where the holder of the right has the option to conclude a business transaction with the owner of a certain real estate property before the owner wraps up a transaction with a 3rd party. The owner could close the transaction with a 3rd party when there is a prior consent of the holder of the Right of First Refusal or if the holder surrenders his right by declining to enter the deal on the same terms.
This is best shown by a simple example. Let us say that A is the proprietor of a property on which he has given a Right of First Refusal to B. C now offers to purchase the estate for $750,000. Before the sale could be concluded, A should offer the property to B at this selling price. If B agrees to the offer, he will buy the home instead. If B turns down the offer, A may then offer the asset to C for $750,000.
You can find a number of variations which can be possible on a Right of First Refusal. It can be restricted in duration so, in the above case, the Right of First Refusal held by B may be limited to a time limit of five years. Right after this time frame is finished, the right is extinguished and A is without any additional obligation to B. One other variation can be the addition of exclusions by which A might be able to sell the property to, say, a member of the family without needing to offer it to B initially. It should nevertheless be noted that the ROFR will likewise be imposed on the new owner. One more variation is to make the ROFR transferable so B could assign it to anyone he selects.
An ROFR can include nearly any form of asset aside from real estate property, which includes patents and business interests. Since it is a right in a contract, the holder of the right has the contractual remedies for breach of the right by way of suing for damages. In other words, if A proceeds to sell the asset to C without initially offering it to B, B can sue for damages versus A but might have a hard time in getting the court to intervene with the sale. But under some situations, a Right of First Refusal will be construed as a property right, in which case a sale that`s treated as irregular may be canceled.
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