Right of First Offer in Australia: Guide for 2025 Investors & Homeowners

The Australian property and investment landscape is evolving rapidly in 2025, with negotiation terms like ‘Right of First Offer’ (ROFO) gaining traction in both residential and commercial settings. Whether you’re a homeowner, investor, or business owner, understanding how ROFO works—and why it matters—can make all the difference in your next big deal.

What Is the Right of First Offer?

The Right of First Offer is a contractual agreement that gives a party (often a tenant, joint venture partner, or existing shareholder) the first chance to purchase an asset before the owner can offer it to external buyers. Unlike the more rigid ‘Right of First Refusal,’ which compels the owner to match an outside offer, ROFO simply requires the seller to give the right-holder the initial opportunity to make an offer on the asset.

• Property sales: Landlords may grant tenants a ROFO on the property they’re renting, allowing tenants a head start if the landlord decides to sell.
• Business shareholdings: ROFO clauses are common in shareholder agreements, giving existing partners the option to buy shares before outsiders can enter the mix.
• Commercial leases: In 2025, major retail and office tenants in cities like Sydney and Melbourne are negotiating ROFO clauses as part of long-term lease agreements, securing future expansion or purchase options.

ROFO in Action: Australian Case Studies and 2025 Trends

In 2025, the Australian property market continues to be shaped by high demand, low supply, and evolving government policies. ROFO arrangements are increasingly seen as a win-win for both buyers and sellers, especially in competitive markets.

Residential Example: Consider a tenant in a rapidly gentrifying Melbourne suburb. The landlord, anticipating future appreciation, agrees to a ROFO clause. When the landlord is ready to sell in 2025, the tenant—who has invested in the property and community—gets the first chance to buy, often at a price based on fair market value. This reduces uncertainty for both parties and can simplify the sale process.

Commercial Example: In the wake of the 2024-25 commercial property reforms, many lease agreements for office spaces in Sydney now include ROFO clauses. These arrangements allow anchor tenants to expand their footprint or purchase the premises outright, providing strategic flexibility as remote work patterns shift.

Investor Insight: For venture capital and private equity, ROFO clauses in shareholder agreements remain a popular way to maintain control and prevent dilution by outside investors, especially as capital flows increase in the Australian startup ecosystem post-2024 government innovation incentives.

Key Legal and Financial Considerations in 2025

With ongoing regulatory updates, it’s crucial to structure ROFO clauses clearly to avoid disputes. Some best practices emerging in 2025 include:

• Clear timelines: Agreements specify exact periods (e.g., 30–60 days) for the right-holder to respond, ensuring deals aren’t unduly delayed.
• Transparent pricing: ROFO agreements increasingly reference independent valuations or predefined formulas to avoid disputes over price.
• Interaction with other rights: It’s common to see ROFO used alongside Rights of First Refusal and tag-along rights in complex deals—especially in the tech and renewable energy sectors, where asset ownership structures are evolving.
• Stamp duty and tax: In 2025, the ATO continues to scrutinise related-party transactions, making it vital to document ROFO deals transparently to ensure compliance.

Recent case law and regulatory guidance from ASIC and state-based property regulators underscore the need for all parties to understand their rights and obligations fully before signing.

Should You Negotiate a Right of First Offer?

ROFO is a strategic tool. For buyers, it provides a unique opportunity to secure valuable assets ahead of the market. For sellers, it can streamline the sales process and reward loyal tenants or partners. However, it’s essential to balance flexibility with certainty, ensuring the agreement is fair and enforceable in line with 2025 legal standards.

• If you’re a tenant or minority shareholder, ROFO can give you a critical advantage in a competitive market.
• Landlords and business owners can use ROFO to maintain goodwill and attract high-quality partners, while still retaining control over final sale terms.

As with any contract, consider the financial, tax, and legal implications—and make sure the details are crystal clear before you sign on the dotted line.