What Is a Right of First Refusal?
A right of first refusal (ROFR) is a legal provision recorded on a property title that gives a specific person or organisation the first opportunity to purchase the property before the owner can sell it to anyone else. In New Zealand, ROFRs appear as encumbrances or interests registered against the title, and they can significantly affect how and to whom a property is sold.
If you are buying or selling property in New Zealand, understanding whether a ROFR exists on the title is essential. Failing to identify one can delay your settlement, expose you to legal disputes, or even invalidate a sale.
How Does a Right of First Refusal Work in NZ?
When a property owner decides to sell, the ROFR holder must be notified and given the opportunity to match the terms of any bona fide offer from a third party. The process typically works as follows:
- Owner receives an offer — A third-party buyer makes a written offer to purchase the property.
- ROFR holder is notified — The owner must inform the ROFR holder of the offer's terms, including price and conditions.
- ROFR holder decides — The holder has a specified timeframe (usually 10–30 working days) to accept or decline the offer on the same terms.
- Sale proceeds — If the holder declines, the owner may sell to the third party. If the holder accepts, the sale proceeds with the holder as the buyer.
If the owner sells to a third party without first offering it to the ROFR holder, the holder may take legal action to have the sale set aside or claim damages.
Where Do ROFRs Appear on a Property Title?
In New Zealand, a right of first refusal is registered as an encumbrance or interest on the Record of Title. When you order a current Record of Title (\.90), it will list all registered interests, including any ROFR, under the Encumbrances or Interests section.
For a more thorough investigation, a Guaranteed Search (\.90) provides official confirmation from the land registry and is often required by banks for mortgage approval.
Common Situations Where ROFRs Exist
ROFRs are more common than many buyers realise. They frequently appear in:
- Treaty settlement land — When certain land becomes available for sale, iwi or hapū may hold a right of first refusal under settlement agreements with the Crown.
- Body corporate developments — Unit title developments may include a ROFR giving the body corporate first option to buy a unit before it is sold externally.
- Family arrangements — Family trusts or siblings who co-own land may register a ROFR so that if one party wants to sell, the others get first option.
- Leasehold properties — The lessee may hold a ROFR on the freehold interest.
- Neighbouring landowners — A neighbouring property owner may hold a ROFR to prevent unwanted development adjacent to their land.
How to Check if a Property Has a Right of First Refusal
- Order a Record of Title — Order a Record of Title with Diagram (\.90) to see all registered interests.
- Read the Encumbrances section — Look for Right of First Refusal, First Option to Purchase, or similar wording.
- Order the underlying instrument — If a ROFR is listed, order the relevant Instrument document (\.90) to read the full terms.
- Get a Guaranteed Search for certainty — A Guaranteed Search (\.90) ensures no new interests have been registered since your initial search.
How ROFRs Affect Property Buyers
- Delays — The ROFR holder's decision period adds time to the transaction, potentially pushing back settlement dates.
- Competition — The holder may exercise their right and purchase the property instead of you.
- Price implications — Knowing a ROFR exists can affect your negotiating position.
- Finance timing — The ROFR decision period may cause your finance approval to lapse.
How ROFRs Affect Property Owners
- Obligation to notify — You cannot accept any offer without first giving the ROFR holder the opportunity to match it.
- Restricted buyer pool — The ROFR gives one party control over whether your sale can proceed.
- Disclosure requirement — You must disclose the ROFR to potential buyers.
Can a Right of First Refusal Be Removed?
Yes, a ROFR can be removed from a property title, but it requires the consent of the ROFR holder:
- Negotiation — The holder agrees to release the ROFR, often in exchange for payment.
- Expiry — Some ROFRs have a sunset clause and expire after a set period.
- Waiver — The holder formally waives their right through a registered instrument.
ROFR vs Right of First Offer
- Right of First Refusal — The holder can match an existing third-party offer.
- Right of First Offer — The owner must offer the property to the holder first, before marketing it.
Both may appear on a property title. Always check the Record of Title to understand which type applies.
Related Articles
- How to Check if a Property Has an Easement in New Zealand
- Encumbrance Search NZ: Understanding Interests on Your Property Title
- How to Register a Caveat on a Property in New Zealand
Frequently Asked Questions
Can I buy a property that has a right of first refusal on the title?
Yes, you can make an offer. However, the ROFR holder must be given the opportunity to match your offer before the sale can proceed. If the holder declines, the sale can go ahead with you as the buyer.
How long does a right of first refusal last on a New Zealand property title?
The duration depends on the terms of the original agreement. Some ROFRs are perpetual, while others expire after a set period or specific event. Check the instrument document registered on the title for the exact terms.
Do I need a lawyer to deal with a right of first refusal?
Strongly recommended. ROFRs involve complex legal obligations, and failing to follow the correct process can invalidate a sale or expose you to liability.
