By Simon Tye, Legal Adviser
This article originally appeared in News on the Block in January 2012
The Landlord & Tenant Act 1987 (as amended) can give the leaseholders, and some tenants, of a building the Right of First Refusal (RFR) when the Landlord is selling the freehold. It should be emphasised that the right is not an individual right to buy the freehold of your flat, but a collective right in respect of the whole building.
The right of first refusal only applies if the building qualifies. For the building to qualify:
- It must contain at least two flats
- No more than 50% of the building should be in non-residential use (based on floor area excluding common parts)
- More than 50% of the flats in the building must be held by “qualifying tenants” (basically long leaseholders fixed or periodic tenancies, other than assured shorthold tenancies) Someone who is a leaseholder of three or more flats in the building will not be a qualifying tenant.
If the building qualifies, the obligation on the Landlord to give the leaseholders RFR only applies when there is a “relevant disposal”.
Most disposals will trigger RFR, the most common being a straight-forward sale of the freehold. There are a number of exceptions which will not trigger RFR such as the following:
- Grant of single tenancies. The disposal must apply to the whole building so the Landlord is free to grant tenancies /leases of individual flats.
- Disposal to an associated company. This is where the Landlord disposes of his interest to another company which has been associated with the parent company for at least two years.
- Disposals arising from leaseholders exercising their right to buy the freehold under the Leasehold Reform, Housing and Urban Development Act 1993.
The offer of RFR is given to each individual qualifying tenant by the Landlord by means of section 5 notice. To accept the offer more than 50% of the qualifying tenants must accept the offer, jointly, within 2 months of the notice. Note that the percentage of qualifying tenants is different to that required under the 1993 Act, which only requires 50% to make a claim. Further time limits apply for the procedure that follows acceptance, including the nomination of a purchaser by the qualifying leaseholders.
If the landlord fails to give RFR, when he should have, the leaseholders’ must consider remedial measures.
This is a particularly complex area of law and the above is only a summary.
Further information:
