What is meant by "right of first refusal" in real estate transactions?

The term "right of first refusal" refers to a specific agreement that grants an individual or entity the priority to purchase a property before the owner can sell it to another potential buyer. This means that if the property owner decides to sell, they must first offer it to the holder of the right of first refusal on the same terms they plan to offer to other buyers. This creates an opportunity for the right holder to buy the property under certain conditions before it is made available to the general market.

This concept is commonly used in real estate transactions to protect the interests of tenants, investors, or other stakeholders by ensuring that they have the first opportunity to acquire the property. The other options described do not capture this essence of priority in a purchase context: the legal right to occupy a property without a formal lease pertains to situational residency rights, an option to extend a lease deals with tenancy terms, and a provision to automatically renew a rental agreement relates to lease continuation rather than purchase rights. Each of these offerings serves different functions in real estate law and transactions, distinct from the right to first refusal.