What does "right of first refusal" mean?

The term "right of first refusal" refers to a contractual agreement that provides a specific party with the opportunity to purchase a property before the owner can sell it to any other buyer. This means that, should the property owner decide to sell, the holder of the right of first refusal is notified and has the first chance to negotiate the purchase under specified terms. If this party decides not to exercise their right, the owner can then sell the property to someone else.

This concept is particularly useful in real estate transactions as it can safeguard the interests of a party keen on acquiring a property, ensuring they have the chance to make an offer before the property is available on the open market. It's an important tool in various situations, such as lease agreements, where tenants may want the opportunity to buy the property they are renting.