Ontario Real Estate Glossary
Right of First Refusal
A contractual clause giving a specific party — often a tenant, family member, or condo neighbour — the right to match any bona fide third-party offer to purchase a property before the owner can sell to that third party. Triggered when a genuine offer is received.
What is a right of first refusal in real estate?
A right of first refusal (ROFR) is a contractual clause that gives a specific party — often a tenant, family member, or condo neighbour — the right to match any bona fide third-party offer the property owner is willing to accept. The owner cannot sell to a third party without first offering the same terms to the ROFR holder. If the holder declines or fails to match within the stated period, the owner can proceed with the third-party sale. ROFRs are common in commercial leases, family property arrangements, and condo bylaws.
How a ROFR works in practice
- The owner decides to sell or receives a bona fide third-party offer
- The owner must notify the ROFR holder in writing with the offer's terms
- The holder has a defined period (often 7-30 days) to match the offer or decline
- If the holder matches, the property sale proceeds with the holder as buyer
- If the holder declines or stays silent, the owner is free to sell to the third party on those exact terms
If the third-party deal falls through and the owner accepts a different offer, the ROFR is typically retriggered — the holder gets another chance to match.
ROFR vs Right of First Offer (ROFO)
The two terms sound similar and are often confused.
| ROFR (Right of First Refusal) | ROFO (Right of First Offer) | |
|---|---|---|
| Trigger | Owner receives a bona fide third-party offer | Owner decides to sell, before any third-party listing |
| Holder's right | Match the third party's terms | First chance to negotiate with owner |
| Better for | Holder (buyer side) | Owner (seller side) |
| Common in | Tenants in commercial leases, condo bylaws | Shareholders in corporate sales |
A ROFO is generally easier to administer and less restrictive on the owner. A ROFR gives the holder stronger protection.
Where ROFR shows up in residential transactions
ROFRs are less common in straightforward residential resale but appear in:
- Tenant ROFRs in residential leases, particularly when the landlord is selling
- Family-property arrangements — a parent selling to a child with siblings holding ROFRs to match
- Condo declaration ROFRs for adjacent unit owners (rare, mostly historical)
- Commercial leases — extremely common, often the most-negotiated lease clause
A registered ROFR is an encumbrance on title. Buyers should always check title for registered ROFRs before submitting an offer — closing on a property subject to an unsatisfied ROFR is a serious title defect.
Where this appears in your Humber program
ROFRs appear in Course 2: Residential Transactions under contractual clauses and Course 4: Commercial Real Estate in lease-clause modules. The ROFR-vs-ROFO distinction is exam-tested.
Frequently asked questions
What is the first refusal clause in real estate?
A first refusal clause (ROFR) is a contractual right that allows the holder to match any bona fide third-party offer before the owner can sell to the third party. The owner must notify the holder when they receive a qualifying offer; the holder then has a defined period to match the same price and terms. If they decline, the owner can proceed with the third-party sale.
Is a right of first refusal a good idea for the seller?
Generally no, ROFRs are seller-unfavourable. The clause chills third-party interest because outside buyers know they can be outbid by the holder, so they often won't bother making strong offers. ROFRs also slow transactions while the holder considers and respond. Most real estate lawyers advise sellers to grant ROFOs (right of first offer) instead — the seller stays in control and avoids the chilling effect on the open market.
How long does a right of first refusal last?
The duration depends entirely on the contract granting the ROFR. Typical terms range from a few months to the life of a lease. Some ROFRs have no expiry and run with the land until released or extinguished. Always read the registered document carefully — perpetual ROFRs are a serious title encumbrance that materially affect the property's marketability.
What is the difference between ROFR and an option to purchase?
A ROFR only gives the holder the right to match a third-party offer — the owner controls if and when the property goes on the market. An option to purchase gives the holder the right to buy at a defined price during a defined window, regardless of whether a third party offers anything. Options are stronger and more valuable than ROFRs because they don't depend on someone else triggering them.
Practice this topic
ExamAce covers ROFR scenarios, the ROFR-vs-ROFO distinction, and contractual-clause drafting in the Course 2 question bank.
See it in practice
Walk through a realistic Ontario scenario where Right of First Refusal matters — with the decision point, the correct move, and the pitfall.
Authoritative sources
Related terms
Agreement of Purchase and Sale
The legally binding contract under which a buyer and seller agree to a real estate transaction in Ontario, capturing price, deposit, conditions, irrevocability, and closing terms. The standard residential APS is OREA Form 100.
Easement
A non-possessory right granted to one party to use a portion of another party's land for a specific purpose, registered on title and binding on future owners.
Buyer Representation Agreement
A written contract between a buyer and a real estate brokerage that establishes the brokerage as the buyer's representative under TRESA. Defines the duration, geographic area, commission, and the duties the brokerage owes the buyer. The standard Ontario form is OREA Form 300.