Right of First Refusal

A Right of First Refusal (“ROFR”) is a right given to some tenants to match a 3rd party offer to lease space (and, on occasion, to purchase property containing the premises leased).

It is trite to state that ROFR clauses require very careful drafting. Unfortunately, even with good legal counsel, drafting issues often arise when the tenant claims the ROFR has been triggered and the landlord disputes that view.

In a June 2012 Alberta court of appeal decision, E. leased 3 floors in an office building. The balance of the building was leased to SNC. The SNC lease provided it with a right to give back single floors at 6 month intervals. The E. lease provided E with a ROFR over “any floor” if the landlord received an offer to lease it wanted to accept for “said floor”. If E exercised its ROFR, it also had to be on the same terms and conditions as the 3rd party offer.

In November 2011, a 3rd party offer was received for all of SNC’s premises plus some additional premises and included roof-top signage rights and 50 parking spaces. The landlord did not think E’s ROFR was triggered but notified E as the 3rd party required E’s waiver of its ROFR. Following notice, E took the position its ROFR was triggered and it did not have to match the 3rd party offer for all the SNC floors but could match it for “any floor” which it said it was doing.

For the complete article view the document below.