Preferential Purchase Options In Commercial Real Estate

04/14/2026 10:41 AM Mark Goodman

If you own commercial property or share property with another individual, it’s possible that preferential purchase options have been noted in a contract agreement between vested parties. In most instances, a preferential purchase option in a contract dictates how one party is required to proceed in the event they wish to sell the property in regards to the other named parties. And while they can come in many forms, two of the most common preferential purchase options are the Right of First Refusal (ROFR) and Right of First Offer (ROFO). In today’s blog, we take a closer look at each of these preferential purchase options and explain what they mean for your commercial asset.

Right Of First Refusal

Right of First Refusal specifies that a named individual has the right to match any offer that is made towards the named property. For example, let’s say that Bob and Tom share some farmland, but Bob is looking to sell and retire. Bob can list his property for sale and field offers, but Right of First Refusal means that Tom can match any offer that comes in, and Bob is required to take Tom’s matching offer. Tom is first in line to refuse to match terms made on the property.

This type of preferential purchase option favors that named party that is not selling, because they can always purchase the property if they are willing to match a proposed offer. It’s less advantageous to a seller, because the existence of ROFR means that prospective buyers may steer away from putting in offers knowing that all their hard work may be for naught if the named party decides to match their offer. However, for business partners who want to discourage selling or retain more control over the future of the property in the event that one wants to exit the partnership, this is the more reliable of the two purchase options to put in a contract.

Right Of First Offer

A Right of First Offer allows a named party to make an initial offer on a property, oftentimes before it is officially listed for sale. If the seller finds the terms agreeable, it can speed up the sale process, avoid some fees and keep all named parties satisfied. However, the seller is under no obligation to accept the first offer. They are within their rights to decline the initial offer and field outside offers from other parties.

The seller is not allowed to accept less than what has been offered by the named party in the ROFO, but they can agree to a higher offer without reconsulting with the named party. Although this type of preferential purchase option gives the named individual the lead in purchase negotiations, it does not guarantee that they’ll be able to secure the property if the seller opts to decline the initial offer. This is more beneficial to the seller, but it at least gives a prospective buyer a leg up on making a potential deal.

If you’re trying to navigate a contract with a preferential purchase agreement, or you’re considering drafting a contract that includes protective purchase clauses, connect with the team at Commercial Partners. We can ensure your best interests are protected and that you act within the guidelines of any preferential purchase terms. For more information on how we can assist with your first or your next commercial purchase, connect with the team at Commercial Partners today at (612) 337-2470.