The Right of First Refusal

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The Right of First Refusal

The Landlord and Tenant Act 1987 gives long leaseholders of flats in the building a right to buy the freehold or superior leasehold interest in their building in the event that the landlord or head leaseholder wishes to sell their interest.

In most circumstances, where a landlord (or head leaseholder) of a building wishes to sell the freehold or head lease of a building containing flats, the landlord must give the long leaseholders (providing they are qualifying tenants) the opportunity to buy it before offering it for sale on the open market. The landlord must make the offer to the qualifying tenants and must state the price and terms on which he is prepared to sell. This is called the right of first refusal.

The qualifying tenants can either accept or not the offer made by the landlord – there is no opportunity for the qualifying tenants to make a counter-offer. If the qualifying tenants do not accept the offer, the landlord can sell the freehold or head lease to anyone within a twelve month period provided that he offers the same interest on the same terms and at the same price as was offered to the qualifying tenants.

The landlord cannot sell at a lower price or on different terms. If the landlord wishes to sell at a lower price or on different terms he must start the right of first refusal process again and offer the interest to the long leaseholders on the new terms.

If the landlord does not comply with his statutory obligations and sells the freehold or head lease without giving the qualifying tenants the opportunity to buy, or if having offered the interest to the qualifying tenants, he sells to another party on different terms after the qualifying tenants have rejected the offer, the landlord commits a criminal offence. The qualifying tenants will also have the statutory right to purchase the freehold from the person to whom it was sold at the same price and on the same terms.

Does your property qualify?

The right of first refusal applies to the disposal of any property containing two or more flats held by qualifying tenants providing that more than 50% of the flats in the property are held by qualifying tenants.

There are exceptions, for example where the building is of mixed residential and commercial use. Properties owned by resident or exempt landlords are also not subject to the right of first refusal

Are you a qualifying tenant?

You will be a qualifying tenant if you are a long leaseholder or a regulated tenant if you hold your lease directly from the person wishing to sell their interest.

You will not be a qualifying tenant and will not have the right of first refusal if you are a shorthold tenant, an assured tenant, a business tenant or if you are an otherwise qualifying tenant but own three or more flats in the same building.

Are you a landlord who must offer the right of first refusal?

Most landlords must comply with the right of first refusal procedure when they wish to sell their interest in a building containing flats.

There are exceptions; if you are a resident landlord in a non-purpose built block who has occupied a flat in the building as their only or principal residence for a period of at least 12 months ending at the date of the sale of your interest.

If you are in doubt as to whether you are required to comply with the right of first refusal procedure you should contact us as for further advice. Failure to comply with your statutory obligations constitute a criminal offence punishable by a fine of up to £5,000.00.

There are strict time deadlines for responding to offers made under the right of first refusal. If you are served with a Notice under this legislation we would advise you to seek legal advice immediately. If you have been served with a notice or require more information on your rights to buy your freehold please contact Rachel McKendrick or Loveday Newton.

Buying your Freehold