Right of first refusal (ROFR) provisions are frequently found in ground leases, joint venture agreements and other real estate agreements. In a typical ROFR provision, the parties agree that if one party receives a bona fide third-party offer to purchase the leased property or a joint venture interest, the holder of the ROFR must first be given the right to purchase the property or joint venture interest on the same terms. Certain scenarios—such as foreclosure sales, deeds in lieu of foreclosure, sales of the interest or property as part of a portfolio sale, or corporate transactions involving the transfer of direct or indirect interests in a landlord—are typically not intended (at least by the transferor) to trigger a ROFR but may inadvertently be captured by ROFR provisions that do not expressly exclude them. These exceptions to a ROFR should be specifically considered by the parties in order to avoid any uncertainty that may arise when a property or joint venture interest is the subject of a transaction or other event that is not a single asset sale but arguably falls within the scope of the ROFR.1

Involuntary Transfers

Parties have litigated over whether a sale upon a foreclosure or the delivery of a deed in lieu of foreclosure should trigger a ROFR. A transfer of the property does of course take place, but courts have nonetheless held that a ROFR should not be triggered because the foreclosure does not occur in response to a bona fide offer and does not constitute a voluntary action by the owner to sell the property.

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