A Section 5A Notice provides qualifying tenants (leaseholders) with their Right of First Refusal offer to purchase the freehold of their building. This particular notice is applicable when freeholders wish to dispose of their freehold interest via a private sale. Private sales can include selling to a specialist freehold buyer or a private individual by way of a contract.
All Section 5 Notices must be prepared and served in accordance with the Landlord and Tenant Act 1987. As such, there are strict rules that must be followed for the Section 5A Notice. Failure to comply can result in a criminal conviction and a fine of up to £5000, so it’s not worth taking chances with these notices if you’re unsure about the procedure and requirements.
Once a Section 5A Notice has been served to qualifying tenants (leaseholders), it is prohibited by law to sell the freehold under different terms within a 12-month period. For example, if the leaseholders do not accept the Right of First Refusal offer, the freehold cannot be sold to another party at a lower price. Furthermore, the landlord’s (freeholder’s) offer is issued on a ‘take it or leave it’ basis, which means that it cannot be challenged and is non-negotiable.
Section 5 Notices only need to be served when the property for sale and the leaseholders (tenants) qualify for the Right of First Refusal.
The property must contain at least two flats, more than 50% of the flats must be owned by qualifying tenants and no more than 50% of the building must be in non-residential use.
The leaseholder must have a lease term of at least 21 years, must not own three or more flats, must not have a short-hold or assured tenancy.
The Section 5A Notices must be served on at least 90% of the qualifying leaseholders. This rule is in place in case some of the leaseholders are untraceable, rather than to provide an opportunity to deliberately omit 10% of qualifying leaseholders.
Qualifying leaseholders have two months from the date on the Section 5A Notice to accept the Right of First Refusal offer. In order to accept, the requisite majority (more than 50% of qualifying leaseholders) must serve a notice of acceptance on the freeholder.
If this acceptance notice is served outside of the two-month period, or not served at all, the freeholder can dispose of the freehold on the open market. However, as noted above, this disposal must proceed on the same terms as those stated in the served Section 5A Notice.
To help you save a whole lot of money and hassle and to guarantee that you are fully compliant with the law, we can prepare and serve Section 5A Notices on your behalf at no cost to you. Our team has extensive experience in assisting freeholders with the Section 5A Notice procedure and can ensure that your freehold sale goes ahead without a hitch.
In most cases, we can prepare and serve your Section 5A Notices within 24-hours of receiving signed confirmation to proceed (subject to having access to the leases and title information). When serving notice, we retain all postage receipts for your file along with all related documentation, so you can rest assured that you have met your legal obligations.
To start the Section 5A Notice procedure or to learn more about our service, complete the contact form and one of our advisors will be in touch to discuss how we can assist you.
Mr Karitzis had an unfortunate experience with the Right of First Refusal procedure when selling his freehold ground rent property. He had paid for the services of what he thought was a professional company to prepare and serve Section 5A notices on his behalf, only to discover that several of his leaseholders did not receive their legal Right of First Refusal offer.
Thinking that his leaseholders simply did not want to accept the offer, Mr Karitzis proceeded to sell the freehold ground rents to a private freehold buyer after the legal two-month period had elapsed. As the sale neared completion, Mr Karitzis received a solicitor’s letter on behalf of his tenants, informing him of the circumstances and advised that if he was to proceed with the sale to a private buyer, it would be an illegal transaction.
Consequently, Mr Karitzis was forced to withdraw from the sale and to pay the freehold buyer’s hefty withdrawal fee. Furthermore, the Notices would have to be re-issued to the qualifying tenants and delivery of these letters needed to be sent by recorded delivery as per the terms of the leases. That’s when Mr Karitzis contacted Freehold Sale.
At Freehold Sale, we are highly experienced in preparing and serving Section 5 Notices and meticulous in our preparation to ensure that legal requirements are met. We also ensure that Notices are served in accordance with what is stated in the lease for the property.
If the lease states that the notice must be served by recorded delivery, we’ll always ensure that we send a second copy by regular post. And if the leaseholder has two addresses, we’ll repeat the process. We also keep copies of each of the Notices and records of when they were sent for added peace of mind, should our clients ever need to prove service.
This meant that we could provide reassurance to Mr Karitzis that his sale would proceed without a hitch.
Mr Karitizis’ leaseholders chose to accept their Right of First Refusal offer to purchase the freehold. Our team also assisted Mr Karitzis by progressing the sale through to completion.
A common scenario that we hear from our customers is where they have been misinformed about the requirement to offer the Right of First Refusal. While some companies may say this in order to charge for their services, there are many companies who simply do not understand Landlord and Tenant Law, which results in inaccurate advice.
Mrs Holman approached one of our competitor freehold buyers with a freehold ground rent property to sell. They informed her that before they could purchase the freehold, she would need to serve Section 5 Notices to her leaseholders. What the company failed to realise was that Mrs Holman’s property did not qualify for the Right of First Refusal, as she found out when she contacted Freehold Sale.
Having a thorough understanding of Landlord and Tenant Law, we were able to quickly identify that Mrs Holman was exempt from having to serve these notices. This is because Mrs Holman’s property contained 10 flats, 6 of which were owned by the same company. And under the Landlord and Tenant Act 1987, someone who is a leaseholder of three or more flats in the building will not be a qualifying leaseholder of any of the flats and will not be entitled to the Right of First Refusal. The remaining number of qualifying leaseholders was less than the requirement of more than 50% of flats in the premises.
Mrs Holman saved a significant amount of time, enabling her to sell her freehold ground rents sooner than she thought. At Freehold Sale, our aim is to provide our customers with expert advice and information so that they can make informed decisions regarding the sale of their freehold properties, and save time and money wherever possible.