Understanding the numerous legalities and procedures involved with selling a residential freehold can be incredibly challenging, even for those experienced in the freehold industry. And this is heavily influenced by the requirement to adhere to Landlord and Tenant Law and in particular, the Right of First Refusal.
Provided by part 1 of the Landlord and Tenant Act 1987, the Right of First Refusal provides leaseholders with an opportunity to purchase the freehold of their building before it is offered on the open market. As such, freeholders looking to sell their freehold interest must adhere to the terms of the 1987 Act or face the legal consequences. This can include hefty fines and even lead to criminal prosecution.
However, the Right of First Refusal is only applicable when both the property and the leaseholders qualify. With several qualifying rules which can be easily misinterpreted, this is where many people become confused. Consequently, many freeholders unknowingly proceed to sell their freehold interest illegally without offering the Right of First Refusal to their leaseholders. Conversely, freeholders can offer the Right of First Refusal unnecessarily, wasting both time and money.
So, it’s pretty important to understand if you qualify for the Right of First Refusal as a freeholder but it’s just as significant for leaseholders. Leaseholders have a legal right to purchase the freehold of their building, whether the freeholder has chosen to sell it or not. The latter is provided by Collective Enfranchisement laws, dictated by the Leasehold Reform Housing and Urban Development Act 1993. Here, leaseholders are given the right to collectively purchase the freehold to their building, so long as they qualify.
Without confusing you with yet more qualifying rules, (you can read more about qualifying for Collective Enfranchisement here), it’s time to get down to business. No matter whether you’re a freeholder or a leaseholder, it’s likely that you’ve arrived here and are patiently reading through to answer that burning question:
‘Do you qualify for the Right of First Refusal?’
To help answer this as simply as possible, we’ve put together a clear and very colourful infographic.
If you’re a freeholder and this infographic has indicated that you qualify for the Right of First Refusal, you will need to serve your leaseholders with a Section 5 Notice to offer them the Right of First Refusal, before you sell your freehold interest to a third party.
As a leaseholder, if you qualify for the Right of First Refusal and you discover that the freehold of your building has been sold or is in the process of being sold to another party without the Right of First Refusal being offered to you, there are several actions that you can take to get the freehold back. Read ‘What happens when you do not comply with the Right of First Refusal’ to find out more.