You looked long and hard for the perfect location for your business — and your diligence paid off! You’ve found a commercial location that’s the right size and the right price.
What happens to your business, however, if the owner eventually decides to get out of the real estate game? Commercial properties are, after all, often seen as investments, and investments are meant to be sold.
The right of first refusal in your lease could be valuable
In simple terms, the right of first refusal (ROFR) gives you the opportunity to own the property yourself if your landlord decides to sell. In practical terms, that means:
- Your landlord would have to contact you and offer you the chance to make the first offer on the property before they list it for sale on the open market.
- If an interested party approaches your landlord and offers to buy the property (even though it hasn’t been listed for sale), your landlord will have to give you the option to buy the property over the other buyer at the same price.
Your landlord may or may not be particularly interested in giving you this option, but it’s definitely a benefit you can bargain over.
Just make sure that you completely understand what triggers the ROFR, especially if the property is owned by a company. For example, will the ROFR trigger only if the building itself is up for sale, or does it trigger if the entire company changes hands? Similarly, you need to know exactly what the ROFR covers — whether that’s just your building or any surrounding land, outbuildings, parking decks and other structures.
It cannot be stressed enough that commercial leases are nothing like residential leases. It’s wise to have experienced legal guidance both during negotiations and when reviewing a potential contract for signature.