Right of First Refusal vs Right of First Offer in Ontario Real Estate

These terms come up in commercial leases and in sales of commercial property. People often use them interchangeably, and that is how disputes start. This article explains what each one means, how they differ, how Ontario courts have described a right of first refusal and what to settle in the contract. For leases generally, see our guide to the commercial lease agreement in Ontario.

What Is a Right of First Refusal (ROFR)?

In 2123201 Ontario Inc. v. Israel Estate, the Court of Appeal for Ontario described a right of first refusal as a commitment by the owner of land to give the holder of the right the first chance to buy the land should the owner decide to sell. The court explained that typically, where an owner is prepared to accept an offer from a third party, the holder is given an opportunity to match the offer. Or, when an owner decides to sell and fixes the price, the holder is given the first chance to buy at that price. In those typical cases the owner has an unfettered discretion whether to sell and when to sell (2016 ONCA 409, paragraph 22; read the decision on the court website).

A Bennett Jones commentary on commercial real estate makes the same point in practical terms: a ROFR typically gives the holder the opportunity to match a bona fide third-party offer that the vendor is prepared to accept. If the holder exercises it within the specified period, the result is a binding agreement on the same terms, and if it is waived, the vendor may proceed with the third-party deal. The commentary adds that ROFRs are creatures of contract, so the analysis starts with the precise language of the agreement (see Rights of First Refusal in Canadian Commercial Real Estate).

What Is a Right of First Offer (ROFO)?

A Bennett Jones article, written about Alberta law, describes a right of first offer as a contractual right under which the grantor must offer the holder the opportunity to purchase the property before offering it for sale to a third party. If the grantor and the holder do not reach an agreement, the grantor may sell to a third party, but on terms no more favourable to the third party than those negotiated with the holder (see Right of First Refusal vs. Right of First Offer). The article is about Alberta, where the law on registering these rights differs from Ontario’s, so use it for the definition only. I did not find an Ontario court decision that sets out how a right of first offer is treated, so the wording of your clause matters even more.

ROFR vs ROFO: The Main Differences

• Who moves first. With a ROFO, the owner comes to the holder first. With a ROFR, the owner usually finds a buyer first, and then the holder can step in.
• What sets the price. With a ROFO, the terms are negotiated between the owner and the holder. With a ROFR, the terms usually come from the third-party offer the holder can match.
• What happens if the holder says no. If a ROFO negotiation fails, the owner may sell to a third party on terms no more favourable to that party than those offered to the holder, according to the Bennett Jones article. If a ROFR is waived, the owner may proceed with the third-party deal.
• Control over the decision to sell. The Court of Appeal noted that rights of first refusal give the land owner control over the decision to convey, and that in the typical case the owner has an unfettered discretion whether and when to sell.
• The wording. Both are creatures of contract, so the notice rules, time limits and what must be offered come from the clause itself.

Does a ROFR Bind the Land? ROFR vs Option to Purchase

This is the point that surprises many people. In the Israel Estate decision, the Court of Appeal summarized the case law this way: options to purchase create immediate interests in land, while rights of first refusal do not. Options are specifically enforceable, while rights of first refusal are not. Options are subject to the rule against perpetuities, while rights of first refusal are not. And options give the option holder control over the decision to convey, while rights of first refusal give the owner that control (paragraph 24).

The court also said that a right of first refusal is a personal right and does not create an immediate interest in land, so it is not immediately enforceable by an action for specific performance. But if the owner receives an offer to purchase that it is prepared to accept, the right of first refusal is converted into an option to purchase. At that point, the holder has an interest in the land that can be specifically enforced (paragraph 23).

The court also found that the agreement in that case did not fit precisely into either definition, which is a reminder that the label in a contract does not settle the question. A clause called a ROFR may work like an option, and the reverse. What the clause actually says and how it is triggered is what counts.

Where ROFRs and ROFOs Appear

• Commercial leases. A tenant may be given a right over the building it rents, or over neighbouring space. See our articles on key clauses in a commercial lease and commercial lease termination.
• Sales of property. A buyer, or a seller who keeps a right over land it sold, may have one. The Israel Estate case involved a seller who had agreed with the buyer that the land could be bought back if a condition was met.
• Portfolio sales. Bennett Jones notes that ROFRs become more complex when several properties are sold together and some of them are subject to ROFRs, and that Canadian case law on this is limited and conflicting.

What to Settle in the Contract

If you are asked to grant a ROFR or a ROFO, or you are the holder of one, these are the points to settle in writing:

• What triggers it: a decision to sell, a third-party offer or something else, and what counts as a sale.
• What is covered: the whole property, part of it, or a portfolio sale that includes it.
• The notice: how and when the owner must tell the holder, and what the notice must contain.
• The time limit: how long the holder has to respond, and what happens if it does not.
• The terms: whether the holder must match the third-party terms exactly, and how non-cash terms are treated.
• What happens after: whether the right continues if the holder says no or the sale does not close, and whether it ends when the lease ends.
• Who the holder can pass it to: whether the right can be assigned or is personal to the holder.

If You Receive Notice of a ROFR or ROFO

1. Read the clause the same day and note every deadline in it.
2. Do not ignore the notice. Depending on the wording, a missed deadline can mean the right is treated as waived or lost.
3. Ask your lawyer to check the exact wording, including what has to be offered, on what terms and for how long.
4. Keep records of the notice, who sent it and when.
5. If you are the owner, speak with a lawyer before you sign a deal with a third party, because the clause may require you to give the holder a chance first.

Frequently Asked Questions

What does right of first refusal mean?

It means the holder gets the first chance to buy if the owner decides to sell. The Court of Appeal for Ontario has said that typically the holder is given an opportunity to match an offer the owner is prepared to accept, or the first chance to buy at a price the owner has fixed.

What is the difference between a ROFR and a ROFO?

With a ROFO, the owner must offer the property to the holder before offering it to anyone else. With a ROFR, the owner usually finds a buyer first and the holder can then match that offer. Both are contractual rights, so the wording of the clause controls.

Is a right of first refusal an interest in land in Ontario?

The Court of Appeal for Ontario has said a right of first refusal is a personal right that does not create an immediate interest in land and is not immediately enforceable by specific performance. If the owner receives an offer it is prepared to accept, the right is converted into an option to purchase and the holder then has an interest in the land that can be specifically enforced.

What is the difference between a ROFR and an option to purchase?

The Court of Appeal has said that options to purchase create immediate interests in land, are specifically enforceable and are subject to the rule against perpetuities, while rights of first refusal are not. An option gives the holder control over the decision to convey. A right of first refusal leaves that decision with the owner.

Does a ROFR stop me from selling my property?

It does not stop the owner from deciding to sell, but it can require the owner to give the holder a chance first, in the way the clause describes. Selling without following the clause can lead to a dispute, so get advice before you sign with a third party.

Can I sell to someone else if the holder of a ROFO says no?

According to a Bennett Jones article on Alberta law, if the owner and the ROFO holder do not reach an agreement the owner may sell to a third party, but on terms no more favourable to the third party than those negotiated with the holder. Check your own clause, because it may say something different.

Who decides how a ROFR or ROFO works?

The contract. Both are creatures of contract, so the notice rules, the time limits and what must be offered come from the precise language of the agreement. Have a lawyer read it before you rely on it.

Related: our guides to the commercial lease agreement and the agreement of purchase and sale, our articles on commercial lease clauses and commercial lease termination, and our commercial lease and commercial real estate sale services.

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Legal Information, Not Legal Advice. This article is general information about rights of first refusal and rights of first offer in Ontario real estate, based on the Court of Appeal for Ontario’s decision in 2123201 Ontario Inc. v. Israel Estate, 2016 ONCA 409, and commentary by Bennett Jones LLP (March and February 2026), checked on November 13, 2026. It does not say how an Ontario court would treat a right of first offer. Every clause turns on its wording, so speak with a real estate lawyer before you rely on or grant one.