Sales by auction

When the landlord sells their interest in the property by auction, bidders are told that it is being sold with right of first refusal (RFR) attached.

RFR lets qualifying tenants:

• opt into the process and buy the interest at the winning auction price
• not opt into the process, and lose the right to buy the interest
• opt into the process but decide not to buy the interest, which means it is sold to the winning bidder

The landlord must first serve you with an offer notice (called a Section 5B notice) stating their intention to sell by auction.

The offer notice must state:

• details of the property and associated freehold or headlease to be auctioned
• that the landlord’s interest will be sold by public auction
• that the notice is an offer to give qualifying tenants RFR on that interest at the price reached at auction

It must also include:

• the initial period: the date by which the offer for RFR must be accepted (at least 2 months before the auction)
• when the nominated purchaser must be identified – at least 28 days before the auction

The landlord must serve qualifying tenants an offer notice stating their intention to sell their interest in the property.

They must serve the offer notice:

• to at least 90% of qualifying tenants (where there are fewer than 10 qualifying tenants, the landlord may serve it to all but one)
• to any right to manage company that has been set up for the building
• between 4 and 6 months before the auction

The date that the last notice is served counts as the date for all notices served.

When selling their interest in the property by auction, the landlord does not have to include the date of the auction in the offer notice.

If they do not include the date, they must:

• serve a separate notice including the auction’s date, time and place
• do so at least 28 days before the auction
• send it to more than half of qualifying tenants

If the qualifying tenants want the option to buy the landlord’s interest at the price reached at auction, more than half (“requisite majority”) must participate.

If one or more qualifying tenants drop out at any point and you no longer have more than half the flats participating, you must notify the landlord. The offer will then be withdrawn.

Qualifying tenants must:

• notify the landlord that they accept the offer of RFR at auction price
• do so before the initial period in the offer notice finishes
• choose their nominated purchaser by the deadline in the offer notice
• have the nominated purchaser serve notice confirming their participation no later than 28 days before the auction

You do not have to attend the auction. You should not place any bids as this is only likely to increase the final price.

Starting on the date of the auction, the landlord has 7 days to send the nominated purchaser a copy of the contract of sale.

After receiving the contract, the nominated purchaser has 28 days to sign the contract and pay any deposit needed. If they do not, the landlord can sell to the highest bidder or sell it through another auction, but not for less than the winning bid at the previous auction.

If the landlord’s interest does not sell at auction or if the sale is withdrawn by the landlord, they cannot try to sell it without again offering qualifying tenants right of first refusal.

If either the landlord or the nominated purchaser withdraws, they will be liable for the other’s costs.