ROFO vs ROFR: Key Differences Explained

The table compares the two on what each is, who sets the price, who uses it, legal and tax treatment, the main risk, the effect on liquidity and a typical example. Both give one party the first chance to buy or rent. They differ on whether the market has spoken yet.

Right of First Offer

1. 1.0
   OfferThe owner sends the holder its terms: what is for sale or rent, the price and the main conditions.
2. 2.0
   DecisionThe holder has a set time to accept. Silence usually counts as a no.
3. 3.0
   MarketIf the holder passes, the owner can deal with others. Some contracts bar a deal on clearly better terms without a new offer.

Right of First Refusal

1. 1.0
   Outside dealThe owner agrees a price and terms with a buyer or tenant.
2. 2.0
   NoticeThe owner sends the holder the deal: who, how much and on what terms.
3. 3.0
   Match or passThe holder can step in on the same terms within the window. If it passes, the outside deal closes.

A third right, the right of first negotiation, is lighter still. It only requires talks before the owner goes to the market.

In an office or retail lease, these rights usually cover extra space. A growing tenant wants first claim on the floor above. The landlord wants to keep the building full at market rent.

CRA International shows how a ROFO works. Its 2024 lease amendment covers three floors of the office building it rents. When space there becomes available, the landlord must send an availability notice with the area, the rent and other terms. CRA then has ten business days to take all of it.

If CRA passes, the landlord can lease to someone else. There is a floor, though. If the new deal is worth less than 95% of the terms CRA was offered, the landlord must offer the space to CRA again. The right also ends in the last three years of the lease.

A ROFR in a lease works the other way. The landlord first signs terms with another tenant. The holder can then take the space on those same terms. A landlord may resist it, because prospective tenants may walk away once they learn they can be matched.

The same logic applies when a building or a piece of land is sold. A tenant, a co-owner or a neighbor may hold one of the rights.

• With a ROFOThe owner names an asking price to the holder first. If the holder declines, the owner can sell to others, often within a price floor like CRA’s 95%.
• With a ROFRThe owner signs a contract with a buyer, then gives the holder the chance to match it. The buyer’s deal can fall away at the last step.

Buyers price that risk in. They may spend less on research or bid lower when a ROFR hangs over the deal. A ROFO avoids this, because the holder’s turn comes before any buyer is involved.

For the holder, a ROFR is stronger. It sees the real market price before deciding. A ROFO forces a decision on the owner’s price, with no outside bid to compare.

For the owner, a ROFO is lighter. It runs one round of offers, then the owner is free to sell. Outside buyers are not put off, because no one can take their deal away.

For employees and other holders of private company stock, the company often holds a ROFR. That adds weeks to any secondary transaction. Under the NVCA model, a template from the National Venture Capital Association, the company has 15 days and investors 10 more.

Neither right creates a tax event by itself. Tax arises on the sale, at the price actually paid, whoever the buyer is.

For stock you receive for work, US rules value the shares while ignoring restrictions that will lapse. A nonlapse restriction, a permanent duty to sell at a formula price, is the exception. A permanent ROFR at a formula price counts as one. A duty to offer shares at fair market value does not.

Right of First Offer

For

The owner sets the price and the timetable. Outside buyers are not chilled. The holder gets first look with clear rules.

Against

The holder decides without a market price to compare. If it declines, the asset may go to someone else for a little less.

Verdict: a ROFO suits an owner who wants to keep control of the sale. It also suits a holder that knows the asset well, such as a tenant pricing the floor above its own.

Right of First Refusal

For

The holder acts only at a price the market has set. It can keep the asset away from unwanted buyers.

Against

Every deal waits for the holder’s decision. Buyers may bid less, or not at all.

Verdict: a ROFR gives the holder the most protection and the owner the most friction. Private companies use it to control who owns their shares. Sellers pay for that control in time and in fewer buyers.

If you hold private shares, find the transfer rules in the bylaws, your stock plan or a separate agreement. Delaware law allows a company to require that shares be offered to it or to others first. The restriction binds you if it is noted on the certificate or in the share notice.

Startup ROFRs often end at the IPO, as Astera Labs’ did. After that, IPO lock-up agreements usually govern when you can sell.

Common Mistakes

• Reading ROFO and ROFR as the sameA ROFO comes before any buyer. A ROFR comes after a buyer has agreed terms.
• Missing the response windowCRA’s lease gives ten business days. Silence usually means you have declined.
• Ignoring the price floorSome ROFOs let the owner sell to others only on terms close to the offer. Check the percentage.
• Promising a buyer a fast closeA ROFR window, plus any investor turn, comes before your sale can close.

Right of first offer (ROFO)

A duty on the owner to offer an asset to one party first, on the owner’s own terms.

Right of first refusal (ROFR)

A right to buy or lease on the same terms an outside party has offered.

Right of first negotiation (ROFN)

A duty to negotiate with one party first, for a set period, before going to the market.

Availability notice

A landlord’s notice that space covered by a ROFO is free, with its terms.

Price floor

A limit on how far below the first offer the owner may go with someone else.

Nonlapse restriction

A permanent duty to sell at a formula price. US tax rules take it into account when valuing stock.

Transfer restriction

A rule in a company’s documents that limits how and to whom its shares can be sold.

Secondary transaction

A sale of existing shares from one holder to another.

Figures were last checked on November 6, 2026. Corporate law is Delaware law, and tax rules are United States federal rules. Each lease, plan and agreement sets its own binding terms.