The Right of First Refusal on Office Space
Often referred to as ROFR, the Right of First Refusal is a powerful tool for office tenants. A right of first refusal gives the office tenant the right to lease additional specified office space should an outside party express interest in that office space. The right of first refusal is often preferred to the right of first offer (ROFO). While the ROFO gives the tenant the opportunity to lease a space before anyone else, the ROFR allows the tenant to wait until an offer from an interested party is in and then match the highest offer. A ROFR discourages other parties from bidding on an office space and bidding up the price, since they know the existing tenant has the right to match their offer.
Office Space Right of First Refusal (ROFR) Checklist
Below is a simple checklist to assist in negotiating a right of first refusal for office space tenants:
- Is the ROFR a one-time option or is it continues through the term of your office lease?
- Does the ROFR pertain to office space anywhere in the building or just to office space adjacent to your initial premises?
- At what point do you find out a 3rd party offer has been made? After a written offer or once an office lease has already been negotiated?
- After finding out about the offer, how long do you have to exercise your right of refusal?
- Will the available office space the offer concerns be made available for inspection before you exercise your right?
- If you choose not to lease the office space, do you retain your ROFR for the specified space or will the 3rd party’s renewal right override your ROFR?
- If you choose to rent the specified office space, must you meet the offered terms or is it possible to amend them to match the terms of your original lease? Will your original lease be amended to match the new terms?
- In the event that you rent the ROFR office space, will the renewal rights be the same as the rights for your initial premises?
Negotiation a right of first refusal is complicated, but settling for terms you do not fully understand can be detrimental to your business. Businesses should retain a tenant representation commercial real estate broker to negotiate the office lease and to guide them through the office relocation or lease renegotiation process.
At Golden Group Real Estate, we specialize in tenant representation real estate services for office space users in the Chicago area, helping local business owners find office space and negotiate lease and purchase agreements. We never represent landlords, so we are prepared to negotiate aggressively on behalf of our tenant clients.
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