If I decide to sell my rental house, do I need to offer my tenant a right of first refusal?

In real estate, a right of first refusal agreement allows a buyer and seller to enter into an arrangement by which the potential buyer is given first opportunity to purchase a property before the seller considers any other offers. The right of first refusal can be a complex matter with contingency issues, such as deadlines, limitations, obligations, and purchase price. All parties to a potential agreement should consult with an attorney to understand all issues before entering into an agreement.

It is beyond the scope of this forum to provide adequate detail for a right of first refusal agreement. Information provided in this article should not be construed as legal advice. Readers are advised to conduct their own research on the issue. However it may be necessary to conduct research depending upon the location of your rental property. In researching this issue as a general matter, we found that in Maryland, Baltimore City has a law granting tenants the right of first refusal. The law provides that before the owner of a single-family residential rental property sells or transfers the property to another, the current tenant has the opportunity to purchase the property on commercially reasonable terms (Subtitle 6 of Article 13 of the Baltimore City Code).There may be other localities that have similar laws.

In general, as a landlord-tenant consideration, a right of first refusal clause would be written into the lease agreement between landlord and tenant. In simplest terms the landlord, in compliance with the agreement, must offer the tenant the opportunity to purchase the rental property before he, the landlord, can negotiate with other potential buyers. If your lease agreement does not specifically address the right of first refusal, you have no obligation to offer special considerations to the tenant. If the tenant is interested in purchasing the rental once the listing has been placed with your real estate agent, the tenant can make an offer as would any interested potential buyer.

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