A right of first refusal is, essentially, an option contract. It is a contract or a condition in a contract between the owner of an asset, and some other person with an interest in that same asset, that allows the interested person to buy the asset from the owner instead of allowing the owner to sell it to a third party. Put differently, it’s a conditional right to acquire property, depending on the owner’s willingness to sell. (Campbell v. Alger (1999) 71 Cal.App.4th 200, 206.)
The classic example is for a long-term lease of a house. There, as part of the lease, the owner provides that the renter has a right of first refusal if they rent for a set amount of years (let’s say five). After those fives years are up, the owner tries to sell the house on the market to a third party. But, because of the right of first refusal, the renter must be allowed to chance to make the same offer as the third party. Only if the renter “refuses” to match the offer is the sale allowed to proceed.
While the concept itself is rather straightforward, there are many legal complexities that can arise when the right is integrated into other actions concerning property, such as eminent domain proceedings, probate sales, and partitions.