From Renter to Owner: Understanding the Right of First Refusal

If you’re a renter and your landlord suddenly tells you the apartment or house is going up for sale, it might feel like you’re being pushed out with no warning. But, what if you had the chance to secure it before it hit the market? That’s where something called “the right of first refusal” (ROFR) comes into play. 

If you’ve never heard of it, don’t worry. Most renters aren’t familiar with this legal term. However, knowing how it works could put you in a better position if your rental home ever goes up for sale. 

Let’s break it down in everyday language and find out what it is, how it works, and why it might matter to you when you’re renting. 

What is the right of first refusal? 

The right of first refusal is a legal right that gives a renter the first chance to lock in a property before the owner can offer it to anyone else. Think of it as a “dibs” clause in real estate. 

If your lease includes a right of first refusal and your landlord decides to sell the place, they have to give you the chance to obtain it under the same terms they’d offer another buyer. You don’t have to do so, but you do get the option. 

This clause is more common in condo buildings and co-ops, especially when you’re renting in big cities, like New York or San Francisco. Yet, more landlords and renters across the U.S. are starting to add it to lease agreements, especially in hot housing markets. 

How does it work? 

Let’s say your landlord decides to sell the house or apartment you’re renting. If you have a right of first refusal written into your lease, here’s how the process usually plays out: 

• Your landlord gets an offer from a buyer or sets a price they’re ready to accept. 

• You get notified in writing (usually by certified mail or email) about the offer. 

• You get a set amount of time (often 30 days) to say whether you want to buy it under the same terms. 

• If you say yes, you move forward with the purchase. 

• If you say no, the landlord can sell it to someone else, usually at the same price or higher. 

Some agreements might even allow you to match an offer from another buyer if someone else is interested. This gives you a little power to stay in your home, rather than having to move if it changes hands. 

Where can you find the right of first refusal? 

As a renter, you’re most likely to run into a right of first refusal in one of these three ways: 

• Directly in your lease agreement. 

• In a separate agreement that you and the landlord might sign with this right. 

• With certain buildings — like co-ops or condo boards — that require a right of first refusal before a unit can be sold. This is more common in older, urban housing. 

Even if you don’t have it now, you could ask for it when you sign a new lease, especially if you think you might want to buy the place someday. 

What are the pros and cons of having the right of first refusal? 

Pros:

• Security: If you love where you live, this gives you a shot at staying there permanently. 

• Time to plan: You’ll get advance notice if the property is being sold. 

• Potential deal: You might be able to buy the place at a fair price before it hits the open market. 

Cons: 

• You still need to qualify: You’ll need financing, just like any other buyer. 

• Short timeframe: You usually only have a few weeks to make a decision and get your finances in order. 

• Not always guaranteed: If you can’t match the price or act fast, the chance passes. 

Can you ask your landlord about it? 

Yes, you can ask your landlord to include a right of first refusal in your lease, especially if you really like where you live and are open to the idea of becoming an owner soon, or think that the landlord might sell shortly. 

Some landlords may be open to it, especially if you have a good relationship. Specifically, if you’ve been renting the place for a while and always pay on time, it might be a good time to bring it up. Just make sure it’s in writing and reviewed by a lawyer, if possible. Verbal agreements don’t carry much legal weight when it comes to property rights. 

What if the landlord sells without telling you? 

If you have this right in your lease and your landlord sells without giving you the chance to buy first, you could potentially take legal action. That could mean asking the court to stop the sale or even seeking damages, depending on your state’s laws. 

That said, it’s best to get legal advice if you’re in that situation. Every state handles right of first refusal issues differently. 

Why should you care about this? 

Most renters don’t think about buying, especially early on. But life changes fast. Maybe you get a better job, save up more or just fall in love with your current home. If the chance to buy it came up, wouldn’t it be nice to have the first option? 

Even if you’re not ready to buy right now, having a right of first refusal gives you flexibility and a sense of control. So, if you’re signing a new lease or renewing one soon, consider bringing it up. It might just give you more options down the road.