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Jay M., from New York asked

What is the difference between a Right of First Refusal, and an Option to Purchase in a lease?


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Today's topic: What is the difference between a Right of First Refusal, and an Option to Purchase in a lease?

An Option to Purchase is an absolute right that the property owner gives to the lessee, the tenant, to buy the property at a fixed price within a
certain period of time. The option binds the owner to sell at such time the option is exercised, but does not obligate the lessee to do anything. During the option term, the owner usually cannot revoke or withdraw the option, without the lessee's consent.

A Right of First Refusal obligates the property owner to offer the property to the lessee, upon the same terms as the owner proposes to sell to any other third party.  A Right of First Refusal gives the owner more control over the transaction than an Option to Purchase, because the lessee cannot force the sale at will.

The lessee must wait until the owner decides to sell the property.  And the price is typically determined at the time the owner decides to offer the
property for sale to any interested buyer.

If the lessee rejects the Right of First Refusal, the owner is then free to sell to the third party upon the terms offered to the lessee.  However, if the lessee agrees, the owner must sell to the lessee under those same terms.

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