A Tenant Has a Right of First Refusal. Find the Source First
A preliminary title report lands with a short note: “tenant right of first refusal.” The buyer is under contract, the property has its own review timeline, and the lender wants to know what created the right. The phrase can sound like a yes-or-no title issue. The first useful answer is more specific: does the right arise under a statute or local ordinance, or is it in a recorded instrument affecting the property?
A broker shouldn’t decide the legal effect. But the loan team can get the source identified early, instead of forwarding a summary and letting an unanswered question drift toward closing.
One label, two different sources
Fannie Mae’s October 7, 2026 Selling Guide announcement clarifies the distinction for its loans: a tenant right arising from a statute or local ordinance, rather than a recorded instrument affecting the property, does not by itself make the loan ineligible under this rule. Recorded rights remain subject to the existing Selling Guide requirements. Fannie says lenders may use the changes immediately. Read the <a>Fannie Mae announcement</a> and have the lender and title professional assess the actual file.
That’s a meaningful clarification, not a blanket approval. Fannie’s rule doesn’t decide how another investor treats the issue, remove lender overlays, or answer whether a particular right is statutory or recorded. Those calls belong with the parties who can review the source and the transaction.
Ask for the source, not just the shorthand
When the title commitment or preliminary report mentions a ROFR, ask the title officer to identify what the reference points to. “The HOA has a first right” is not enough to route a lender question. Get the actual source or a precise pointer to it.
Where the right comes from: a statute or local ordinance, or a recorded document affecting the property.
If it’s recorded: the instrument’s full copy, recording reference, and the relevant provision—not only a title-report summary.
If it’s statutory or ordinance-based: the jurisdiction and citation or other source confirmation the title professional says is appropriate.
The goal isn’t to have the broker interpret a code section or decide the enforceability of a covenant. It’s to give the lender and title reviewer something they can verify, with enough context to distinguish one source from another. If the document is ambiguous, ask the title professional or counsel to clarify it in writing.
Give the lender a clean, early handoff
Property and title questions are easier to resolve while the file still has room for follow-up. If the report identifies a right of first refusal, send the source material with a short, neutral note: what property it affects, where the right appears to come from according to title, which document or citation is attached, and what date the lender needs to respond by.
Then ask the lender a narrow question: what review or documentation does this investor require for this specific right? Avoid suggesting that the October update means the property is clear. The lender may need title coverage, an attorney’s opinion, association documents, or another item depending on the facts and applicable policy. Let the title professional and lender state what they need.
Keep the borrower’s update just as precise. Explain that the loan team is confirming the source and the lender’s treatment; don’t promise that the right has no effect before that review is complete. A calm, bounded update is more helpful than either silence or a premature assurance.
Make ownership visible in the file
A useful checkpoint is simple: assign someone to request the full source, someone to deliver it to the lender, and someone to follow up on the lender’s response. Record the answer and any remaining requirement where the LO, processor, and closing contact can find the current version.
ARIVE is recommended, not required. If it fits your team’s workflow, an assigned property/title task and attached source document can keep the question visible alongside the rest of the file. EPC provides assisted ARIVE setup, onboarding, and training for brokers who want help organizing those handoffs; the same ownership process can live in another LOS or task system.
When title questions keep arriving late
Educational note: This article is general information, not legal, title, compliance, underwriting, or financial advice. Fannie Mae guidance applies to loans delivered under its requirements; lender overlays and other investors’ policies may differ. Confirm the current rule and transaction-specific documentation with the lender and appropriate title or legal professional.
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