Do I have to offer my tenants the Right of First Refusal when selling my freehold interest?
You will be legally obliged to do this if your freehold property meets certain criteria and if your tenants qualify for the Right of First Refusal. Read our Right of First Refusal Guide for more information.
Under the Landlord and Tenant Act 1987, resident landlords are exempt from offering the Right of First Refusal, so long as they meet the following conditions: The building is not a purpose-built block of flats, that is, it must be a property, a house for example, which has been converted into flats since its original construction; and The landlord genuinely lives in the building as his only or principle residence and has done so for the past twelve months
A creeping freehold is a freehold property where a section of that property underlies a different freehold at ground level, such as a basement or cellar
The Section 20 Notice forms part of a three-stage consultation procedure. This enables leaseholders to provide their observations, any objections to the works, and to nominate contractors from whom the freeholder should obtain estimates. If leaseholders feel that the freeholder is requesting excessive or unreasonable sums for the works, they can apply to the First-Tier Tribunal for a determination of liability to pay and the reasonableness of any service charges demanded.
Section 20 Notices must be served in accordance with what is stated in the lease for the property. This is typically 1st class mail or recorded delivery. It is advisable to only send Section 20 Notices via email as an additional form of service.
The process for issuing Section 20 Notices is typically dictated by the lease for the property. However, the common requirement is for Section 20 Notices to be served via 1st class mail to the leaseholder’s property. Alternatively, the lease may require service of Section 20 Notices via recorded delivery.
Technically, a Section 20 Notice cannot expire. Although there is no specified time limit for the service of a Section 20 Notice, the relevant works should not be delayed as there is a risk that changes can take place, amounting to a breach of the consultation requirements.
A Section 20 Notice of Intention informs leaseholders that the freeholder of the building in which they own a property wishes to carry out major works. As leaseholders are typically required to cover the cost for works, the Section 20 Notice procedure provides them with an opportunity to decide how their money is spent.
Qualifying works under Section 20 are any maintenance or repairs to a residential freehold property where the contribution from any one leaseholder will exceed £250.
If you use our free Section 3 Notice template you will only have to pay for posting the notices to your tenants. However, if you employ the services of professional such as a solicitor, your costs will inevitably be higher.
It is considered a summary offence if you fail to serve tenants with a Section 3 Notice in the prescribed format. This can lead to a criminal conviction and a fine. You may also have to undo the sales transaction. Learn more about Section 3 Notices here.
No you do not need a solicitor as you can easily prepare and serve Section 3 Notices yourself, using our professional Section 3 Notice template, which you can which you can download from our website here.
Enfranchisement refers to the purchase of the freehold of leasehold houses, whereas collective enfranchisement refers to the purchase of the freehold of a building containing multiple flats/apartments.
Collective Enfranchisement is the right outlined in the Leasehold Reform Housing & Urban Development Act 1993 for leaseholders of a building containing flats to collectively purchase the freehold. Learn more here.
Tenants qualify for Collective Enfranchisment if at least two-thirds of the flats are owned by qualifying tenants and their leases were granted with an original term of more than 21 years. If tenants own more than two flats in the building, they will not be eligible. Find out more.
If a leaseholder or group of leaseholders wish to purchase their freehold, they could approach the landlord informally. However, if they are unsuccessful they are able to serve their landlord with an enfranchisement notice. Leaseholders can only collectively enfranchise if they qualify to do so. Learn more about enfranchisement here.
In most cases you will not be able to prevent your tenants from purchasing the freehold unless they are not eligible to do so. Once you are served with a notice of enfranchisement, you will have two-months to issue your counter notice. Learn more here.
The Section 20 Consultation procedure can take several months to complete. This is because there are two compulsory stages that require the person responsible for arranging major works, to send a different Section 20 Notice to leaseholders. On receipt of these notices, leaseholders must be provided with 30-days in which to respond. The person responsible for arranging major works will also be required to obtain estimates for the works, which could take some time. .
Although we are not able to create or draft leases, we can assist freeholders or developers who require support with the terms that should be included in the lease, such as ground rents, rent review best practices, and key points such as repair obligations and service charges. In order to draft leases, we recommend employing the services of a qualified solicitor.
Our expert team are highly experienced to deliver accurate appraisals of freehold ground rents. Our valuations are based on what you would likely achieve from a sale to a freehold investor. For a professional valuation to be used in any formal proceedings, you may need to contact a chartered surveyor.
To value freehold ground rents we first require the address of the freehold property so that we can obtain the leases from Land Registry. Using the leases together with other variables, our experts perfom a detailed appraisal of the freehold property.
Our freehold valuation calculator has been formulated using current market data to provide you with the most accurate estimations possible. Although the results will help you to understand the potential value of your freehold ground rents, they should not be used in place of a formal valuation. The results should not be relied upon and cannot be used in a tribunal or court proceedings.
Our freehold valuations are market appraisals based on the sale potential of the freehold. This service is provided for free for freeholders wishing to sell their freehold interest.
We can provide you with a valuation of your freehold interest in under 24-hours but in most cases, you’ll hear from us on the same day that you enquire.
Without specialist knowledge it would be extremely difficult to carry out an accurate valuation or even to know where to begin. There are many variables to consider and each must be assessed accurately. Furthermore, if a crucial detail is missed your valuation could be off by thousands of pounds. Freeholders can obtain a free appraisal of their freehold ground rents here.
Section 20 Notices require careful attention to detail and if served incorrectly, could prevent the landlord from collecting contributions from the leaseholders for major works. We recommend seeking assistance from industry professionals or a qualified solicitor if you do not know how to serve Section 20 Notices. Request our free Section 20 templates here.
A Section 20 notice is issued by the landlord to the tenants (leaseholders) for one of two reasons; to notify tenants of their intention to carry out works; or to notify the tenants of their intention to enter into a long-term agreement for services at the property.
No, you do not need a solicitor to prepare and serve Section 20 Notices to leaseholders so long as you feel confident in doing it yourself. To help you, we have created free Section 20 Notice templates that you can download directly from our website.
Yes, we provide a template for each stage of the Section 20 consultation procedure. You will receive all three templates directly to your email inbox by completing a simple contact form. Get your templates here.
Section 20 Notices can be served for mimimal cost if handled by the landlord. However, if you seek assistance from a professional service provider, they may charge by the hour. We would advise you to seek a quote in order to help with your decision.
If you fail to serve Section 20 Notices and you go ahead with works, you will only be entitled to recover £250 from each leaseholder after the event. Learn more about organising major works here.
The leases usually dictate that it is the leaseholder’s responsbility to pay for major works to the building. Learn more about organising repairs and major works here.
A Section 3 Notice informs leaseholders of a change of landlord/freehold owner and provides the new landlords details. The new landlord is obliged to notify the tenants of their details within two months or no later than the next rent due date.
You must serve tenants a Section 3 Notice to inform them that you are their new landlord within two months of purchasing the freehold or before the next rent due date.
No, you do not need a solicitor to prepare and serve Section 166 Demand Notices. We can provide this service on your behalf as a low cost option. Alternatively, if you are knowledgeable of the requirements of Section 166, you can request a free Section 166 Demand template from us to prepare and serve yourself. Learn more about our Section 166 Demand solutions here.
Ground rent arrears are payments which are overdue and therefore payment should be made immediately. However, you may wish to offer a delayed deadline to encourage compliance.
If you fail to serve Section 166 Demand Notices to your tenants, or if they’re not served in the correct format as prescribed by the Commonhold and Leasehold Reform Act 2002, your tenants may exercise their right not to pay their ground rent.
Yes, as it costs money to pursue tenants that are in arrears. If you are forced to pursue overdue payments you are entitled to charge for the administration in doing so.
A residential lease is a legal contract beween a freeholder (landlord) and a tenant (leaseholder). A lease sets out the rights, obligations and responsbilities of both the freeholder and the leaseholder.
A lease extension is an increase in the number of years that the leaseholder is entitled to live in the property before it reverts back to the freeholder.
The amount that it costs to extend a lease is dependent on a number of different factors. This includes but is not limited to the number of years remaining on the lease, the amount of ground rent payable, and the value of the property. To get an estimate of the premium payable to extend a lease, use our Lease Extension Calculator.
You can obtain an estimate of the premium payable to extend your lease using our Lease Extension Calculator. For a formal valuation, you will need to employ the services of a chartered surveyor.
Marriage value is 50% of the difference in value between your property having a short lease (before renewing) and when the lease is extended. Marriage value comes into effect when the remaining lease term falls below 80-years, and will increase the premium to extend a lease as marriage value is added to the premium payable to the landlord.
Our lease extension calculator has been formulated using current market data to give you the most accurate estimation of the premium payable. However, we cannot guarantee true accuracy and the results must not be relied upon or used in any formal proceedings or tribunal.
This depends on how quickly and easily we can obtain the required information. This consists of the arrears, copies of the leases, copies of any previous demands and address details for the leaseholders. Once we have this information, notices can be issued within 24 hours.
Ground rent varies between properties. Older leases tend to have lower annual ground rents such as £5 to £50 whereas modern leases are more commonly based on 0.1% of the property value. Learn more about how ground rent is calculated here.
Yes, we can collect ground rents with our low-cost Section 166 Ground Rent Demand Service. We can demand ground rent on your behalf for up to six previous years to help you easily recover arrears. Learn more about our service here.
Leaseholders commonly pay ground rent once or twice annually and sometimes on the four annual rent payment days. This will be detailed in the lease agreement.
If your leaseholders aren’t paying ground rent there are several things that you can to do such as write to their lender to request payment or apply for a county court judgement. Read our expert recommendations here.
If you are not familiar with this process, you should consider seeking advice from industry professionals or a qualified solicitor. Learn more about the section 166 Notice here.
No, you do not need a solicitor to prepare and serve Section 5 Notices. We can provide this service on your behalf and in most circumstances we can do this at no cost to you. Learn more about our Section 5 Notice Service.
A resident landlord is someone who lives in the building as their only or principal residence and has done so for more than 12 months. The property must not be a purpose built block of flats, it must be a house converted into flats from its original construction.
Leaseholders qualify for the Right of First Refusal so long as they do not own more than three flats in your building. This includes most fixed or periodic tenancies but excludes business and agricultural tenancies.
Leaseholders have two months to accept the landlord’s Right of First Refusal offer. However, this can be four months when selling your freehold through an auction house. Learn more about selling your freehold here.
The landlord’s offer is served on a ‘take-it or leave-it’ basis and is not negotiable. The disposal would be deemed illegal should the landlord sell for a lower price than that stated in the offer notice.
This is a legal document and it is therefore advisable to seek the assistance of an industry professional or qualified solicitor to prepare and serve Section 5 Notices. It is important to issue the notice correctly in order to avoid an illegal disposal which could result in the disposal being challenged by the leaseholders.
If your freehold property has been your only principal residence for the last 12 months, you will be exempt from offering the Right of First Refusal. Find out more here.
A qualifying tenant includes leaseholders and most fixed or periodic tenancies excluding shorthold or assured tenancies. A qualifying tenant is restricted to owning no more than 2 flats in the building.
A Section 5 Notice is a document that is provided to qualifying leaseholders when selling a freehold property. It both informs the tenants of your intention to sell and offers them the Right of First Refusal to purchase the freehold collectively. Learn more about the Section 5 Notice here.
The Right of First Refusal gives leaseholders in a freehold property the opportunity to collectively purchase the freehold to the building in which they own a flat/apartment. The Right of First Refusal is provided by Part 1 of the Landlord and Tenant Act 1987. Leaseholders are offered the Right of First Refusal by way of a Section 5 Notice.
Ground rent is a sum of money which a leaseholder pays to a freeholder in return for living on his land. If ground rent is payable, the lease will specify how and when it is payable.
Freehold interest is the term used to describe the landlord’s interest in the property. In this case the freehold interest refers to the rights over the land i.e. the freehold ownership.
Freehold ground rents are created when a building which resides upon freehold land is sold under a lease. For example, each property in a block of flats which is built on freehold land will have a lease. This lease dictates how many years the leaseholder is entitled to live in the property on the freeholder’s land, and how much ground rent they shall pay in return.
A freehold is the ownership of land and any building or structures which stand upon it. A person who owns a freehold property is often called a landlord by anyone living on the land. The landlord may grant a lease for another person to occupy the land or building.
A qualifying tenant is a tenant whose lease was granted for an original term of more than 21 years. The tenant is not required to have any present or past residence in the flats and there is no limit on the number of flats which one tenant may own.
There are various different ways to sell freehold ground rents. These include using a specialist freehold buyer like Freehold Sale, selling at an auction house, or selling to the leaseholders. Do your research to find the option that suits you best. Read our ‘Top ten tips for freehold sellers‘ for more advice.
Ground rent sale means the sale of a freehold property containing multiple leasehold units i.e. a block of flats or a single leasehold house, where each leaseholder pays a ground rent to the freeholder/landlord.
This depends on how you choose to sell your freehold interest and any requirements to offer the Right of First Refusal to the leaseholders. The good news is that Freehold Sale specialise in helping our customers to dispose of their freehold quickly. We aim for the sale to complete within four to eight weeks of receiving the contract from your solicitor. For more information read: ‘How long does it take to sell a freehold?‘
The freehold selling process duration depends on how you choose to sell your freehold interest. If you have qualifying tenants, you may need to offer them the Right of First Refusal. This takes between two and four months depending on the selling avenue you have chosen. To find out more read: ‘How long does it take to sell a freehold?‘
Profit from the sale of such an asset is subject to tax. You should seek advice from a qualified person as to whether tax will be payable on your sale and how much this will amount to.
We buy residential freehold properties of all sizes across England and Wales. This includes purpose built blocks of flats and converted buildings containing at least two flats or apartments. Discover how to sell your freehold here.
Yes, a freeholder can sell the freehold at any time but they must always offer the Right of First Refusal to qualifying tenants. If the tenants do not wish to purchase the freehold, the freeholder then has the option of a private sale. Or you can notify the tenants of a sale by auction which requires a different form of notice.
A freeholder can refuse to sell the freehold if the leaseholders are not eligible to purchase it. Leaseholders are eligible if they have a long lease of more than 21 years and do not own more than two flats in the building.
This depends on the selling avenue that you choose to sell your freehold interest. It’s advisable to confirm this time frame with the buyer/ selling avenue. If you sell to Freehold Sale, we will transfer the sale proceeds to your solicitor and they will be released to you on completion.
This varies between properties and is based on a number of different factors. Our offers are always competitve and based on the market value of your freehold.
Yes, you can sell a freehold that you’ve inherited. There are certain legal requirements that you should be aware of but the process can be relatively simple so long as you choose a reliable buyer. Learn more about how to sell an inherited freehold here.
Yes, we can buy freehold ground rents before the development has completed and before the properties have been sold. Please contact us to discuss your development with one of our consultants.
Our Right of First Refusal service is free when you sell your freehold interest to us. However, in most cases we can also provide this service for free when a freeholder is selling to a third party. Find out more.
We can usually prepare and servce Section 5 Notices to your tenants within 24-hours, subject to having access to the leases and title information. For freeholds comprising of a large number of leases we may need more time to facilitate this service. Learn more about our Section 5 Notice service.
You will need to offer the Right of First Refusal if your freehold property contains at least two flats, more than 50% of the flats are held by qualifying tenants and no more than 50% of the property is in non-residential use. Resident landlords are exempt. Learn more about the Right of First Refusal here.
