What is the “right of first refusal” in real estate?

The concept of "right of first refusal" in real estate refers to a contractual agreement that grants a specified party the priority to engage in a transaction regarding a property before the owner can offer it to other potential buyers or tenants. This means that if the property owner decides to sell or lease the property, they must first present the opportunity to the holder of the right to decide whether to proceed with the purchase or lease on the terms proposed.

This arrangement can be particularly advantageous for the party holding the right, as it allows them to secure the opportunity to acquire the property without competing with other buyers or tenants. The fundamental aspect of this right is that it provides a preemptive opportunity, ensuring that the holder has the first choice, thus potentially enhancing their position in the market.

In contrast, the other choices do not accurately describe this right. The clause prohibiting sales to others misrepresents the nature of the right, as it does not restrict the owner's ability to sell, but rather outlines a preference for the holder of the right. The notion of a timeline for selling property or leasing for a year does not align with the essence of a right of first refusal, which is fundamentally about priority in transaction opportunities rather than constraints on time or lease terms.