What is a Right of First Refusal?

Welcome to my channel and in today’s video, I am going to answer the question "What is a Right Of First Refusal?".
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Each week, I answer questions asked by our viewers on topics pertaining to commercial real estate. If you're interested in having your question answered, feel free to email me.
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In this video, I explain what a right of first refusal is in commercial real estate and why it's beneficial to tenants/purchasers to negotiate.
A Right Of First Refusal (ROFR) gives you the right to lease/purchase a commercial property prior to another party.
Below I've provided examples of each:
✅ Leasing - you approach the owner of a 5,000 SF vacant building and work out a deal to occupy 2,500 SF. You also negotiate a right of first refusal on the adjacent 2,500 SF. One year later, a potential tenant approaches the landlord with an offer to lease the vacant space. The owner must first offer you the space at the terms proposed by the prospective tenant.
✅ Purchasing - You purchase a 20,000 SF industrial building on an acre of land. Along with that, you negotiate a Right Of First Refusal on the adjacent property as the previous owner owns that parcel as well. One year later, a potential buyer approaches the owner with an offer to purchase the adjacent space. The owner must first offer you the property at the terms proposed by the prospective buyer.
In both scenarios, if you choose to not exercise your right, the owner can freely lease/sell the property to the interested party.
The benefit of this approach is that it affords you the flexibility to expand your business at some point in the future.
If you're interested in buying, leasing, or selling commercial real estate, I'd be happy to help! I look forward to helping you reach your real estate goals!
If you like the video, please SUBSCRIBE, and don't forget to press the bell 🔔, 👍like, comment and share. Stay safe and Love all.
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[@RaphaelCollazo]

What's your biggest takeaway from the video? I'd love to hear your feedback!

[@yosefaronov92]

Wow very well put together. Thanks so much!!

[@RaphaelCollazo]

I’m glad you enjoyed the video! I hope you gain value from future videos as well. 🙏

[@mk-jm5tv]

Since when can you purchase ROFR without being the tenant or without owning neighbouring property? You could purchase a ROFR an owner, never heard of buying it off a tenant.

[@jamiesmela8311]

This was so easy to understand! Thank you for explaining so clearly and in simple terms lol

[@RaphaelCollazo]

My pleasure Jamie! I'm glad you got value from the video.

[@industrialize]

A ROFR is a powerful tool, very well explained!

[@RaphaelCollazo]

Thanks my friend! Yes, ROFR’s are powerful tools for tenants to use to maintain flexibility going forward. Btw congrats on nearly hitting 800 subs! You’ll be at 1k before you know it. 💪🏼

[@industrialize]

@@RaphaelCollazo you’re adding a ton of valuable info, you’re cruising towards 1,000 too! Appreciate your support as well man!

[@WileChile51]

Thank you, just got to this in my studies!

[@RaphaelCollazo]

Thanks for the feedback! I’m glad this video helped you with your studies!

[@confidentrealestateinvesti9152]

Great video. I always look out for that ROFR. Like #4

[@RaphaelCollazo]

Thanks my friend! Yes, ROFR’s can be a powerful tool for tenants. It can also be a red flag for those looking to purchase CRE. It’s important to be on the look out. 👀

[@billmarkelz]

Thank you

[@RaphaelCollazo]

You’re welcome! I’m glad you enjoyed the video.

[@johnbrien1054]

Does ROFR expire on the death of the person who offered it?

[@YM-wj2dr]

Y M 0 seconds ago In a situation where tenants are evicted from an apartment building because the new owner wants to raise the rents higher than what California rent control laws allow, would a right of first refusal apply to the tenants if they would consider paying the higher rent and remain in the apartments? One tenant did ask what the new rent amt would be and the owner's rep told her it would be too high. Seems it would be an influential point in court. Thanks

[@RaphaelCollazo]

Hey Y M! That's a great question and, unfortunately, I don't have a definitive answer for you. Typically, a right of first refusal is written into the original lease and it defines the tenant's right to absorb a new space if the landlord is approached by another party with an LOI. Therefore, it is typically used as a way for a tenant to expand their footprint, not just to remain in their current space.

[@VykxTre]

What if, I (the owner) want to sell it by myself? I'm right now in this situation and don't know what to do if there is someone how knows it could pls help me.

[@RaphaelCollazo]

Great question! If you’re looking to sell the building yourself, I suggest that, at a minimum, you put a sign in front of your property. Additionally, advertise it for sale on various social media platforms and consider reaching out to some commercial agents in the area to let them know your are selling it. Although you may have to pay a 3% fee if they bring you a buyer, you will save the additional 3%.

[@mk-jm5tv]

Why would anyone want to purchase their own ROFR on the property they own???? If the new owners of the condows buy the unit, they wouldn’t need an ROFR, they already own it!!!!!!