Right of First Refusal (ROFR) –
This is a contractual right that gives its holder the option to enter a business transaction with the landlord, according to specified terms, before the owner is entitled to enter into that transaction with a third party. This is especially useful for any contiguous space. This allows the tenant to have the option to expand at favorable terms if the business is doing well.
There are several variations of the ROFR. It is rarely part of the landlord’s boilerplate lease so it is up to the tenant or its’ broker to make sure this is part of the negotiations. Your attorney can help you craft the perfect language for this option.
Right of First Offer (ROFO) –
Rights of First Offer are pro-tenant expansion rights which obligate the landlord to notify the tenant possessing such rights (i.e., the ROFO tenant) that it desires to lease space subject to the ROFO. Although the landlord may or may not have a specific tenant in mind for the space, a ROFO usually requires the landlord to makes a proposal covering the business terms of a proposed lease for the applicable space. These are especially useful with contiguous space the becomes available during the term of your lease.
If the ROFO tenant does not elect to lease the space on the terms offered by the landlord in its notice, the landlord is normally free to try to lease such space to any third party, provided it does so based upon the terms in its notice. In many cases, the landlord must make a deal for the space involved within a certain period of time, or the ROFO will “revive” requiring the landlord to offer the space to the ROFO tenant anew before making a third party deal.