Is Your Tenant Representation Negotiating Right of First Offer or First Refusal?
April 19, 16
Negotiating a commercial real estate lease is complicated. Multiple clauses and real estate jargon dictate the terms of your lease. Choosing to go it alone, can be a nightmare. Your tenant representative is an experienced professional who guides you through the entire process to ensure that the lease aligns with your business's goals and growth potential. One of the most important points a tenant rep will assist with is negotiating whether a right of first offer or a right of first refusal will better suit your business needs.
Right of First Offer
The right of first offer is the right of a tenant to lease a specific space before another party. The landlord must give the tenant the opportunity to negotiate a lease on the designated space. If an agreement cannot be reached, the landlord has the right to lease the space to someone else.
Right of First Refusal
The right of first refusal if also the right of tenant to lease a specific space before another interested party. However, right of first refusal is an option that has exact terms such us a specific rental rate and length. The right of first offer is only an agreement to negotiate.
Depending on the growth rate of your business, each offer their own unique advantages. A right of first refusal often discourages other offers since the current tenant can claim the specified space and squash the deal. On the other hand, the right of first offers reduces transaction costs. The lessor is free to accept or reject the tenants offer and simply move on. The lessor can then entertain other bids. If no one bids higher, he can return to the original tenant to negotiate. The lessee could also choose to reduce their offer at that time.
An experienced tenant rep will work directly with you to determine which option is a better fit for your business. If you looking for commercial space in the Houston area, contact us to learn more about our tenant representation services.