What is the Right of First Refusal?

If you want to sell the freehold of a property containing flats, as a landlord you are legally obliged to offer the freehold to the qualifying tenants before disposing of it. To do this you must provide any qualifying tenants with the Right of First Refusal (‘RFR’).

RFR is served in the form of a Section 5 Notice. It is a written notice that notifies tenants of your intention to sell and the price the freehold is being offered for. RFR is provided by Part 1 of the Landlord and Tenant Act 1987 (the 1987 Act) as amended by the Housing Act 1996.

RFR is only applicable if the freehold contains at least two flats, no more than 50% of the building is in non-residential use, and more than 50% of the flats are held by ‘qualifying tenants’*.

What are the consequences of not providing notice?

It is a criminal offence to sell a freehold without first offering RFR to the qualifying tenants as it is a breach of the obligations set by Landlord and Tenant Act. Not providing the proper notice to tenants can result in criminal conviction and a fine of up to £5,000.

Following the disposal of a freehold, the leaseholders have the right to demand information on the sale, and the option of forcing the new landlord to sell the freehold to them at that price, if the landlord did not comply with their obligation to offer RFR.

How Freehold Sale can help

Selling a freehold can be an expensive undertaking. There are a variety of legal costs involved in serving a Section 5 Notice, from seeking initial advice to fees for preparing, checking and serving the notice. But it doesn’t have to be expensive.

Here at Freehold Sale we have extensive experience in buying and selling freeholds, including serving notice on behalf of our clients. We draw on this expertise to offer the following as part of our competitive RFR service:

  • We will prepare the Section 5 Notice using correct proprietorship information
  • We will issue the Section 5 Notice to all qualifying tenants
  • We will obtain postage receipts to prove that notice has been served
  • We will keep copies of the notices for your records
  • We will typically serve notice on the same day if you instruct us before 3pm

We can help take some of the unnecessary cost out of serving a Section 5 Notice. We pride ourselves on offering a fast, efficient and cost effective RFR service to our clients.

How long do you have to wait once notice is served?

When serving a Section 5 Notice, the qualifying tenants will have two months to consider the offer. The notice is deemed to be served two days after posting. Once two months and two days have passed since the Section 5 Notice was posted, you are able to dispose of the freehold on the same terms as offered in the notice.

*Qualifying tenants are leaseholders within the property. Tenants do not qualify if they own 3 or more flats in the building, have a protected shorthold tenant under Housing Act 1980, are a business tenant, have a tenancy that is terminable on cessation of employment, or are an assured tenant or agricultural tenant under Housing Act 1988.

Call us on 01245 227 920 or use our online contact form to get a quote today.

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Call Us On 01245 227 920 Or Use Our Online Contact Form To Get A Quote Today.

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