Right of First Refusal

The Landlord and Tenant Act 1987 requires landlords interested in selling their property to offer the leaseholders first refusal on the purchase of the freehold.

If you are the owner of a long lease (one originally granted for 21 years or more), you and the other leaseholders in your block have the right to first refusal of the freehold interest (or any other ‘relevant disposal’) when it becomes available to buy.

Even if the purchase of the freehold is not something you had previously considered, you should closely consider any Section 5 Notice that the freehold is for sale.

If you don’t buy, you will be subject to the behaviour of a new landlord. An unknown freeholder is an unknown quantity, so exercising your right of first refusal helps you avoid uncertainty over the management of your block of flats or commercial premises.

For example, a new landlord may not carry out basic responsibilities or they may decide to change the management structure of your building.

Landlords have no option but to offer the leaseholders first refusal to their freehold interest and failure to comply is a criminal offence.

If the landlord does sell the interest without first offering it to the leaseholders, the new freeholder may be forced to hand it over to the leaseholders for the same price they paid.

 

Written by Simon Masters

Senior Associate Solicitor