There might come a time when your freeholder decides to sell their interest in the building where your flat is located. If this happens and the building meets certain criteria, the freeholder must offer the leaseholders the chance to purchase the freehold interest first, through a legal procedure known as the Right of First Refusal, initiated by issuing a Section 5 notice (pursuant to the Landlord and Tenant Act 1987).
What is the Right of First Refusal?
The Right of First Refusal is a legal obligation that requires the freeholder to offer their interest in the building to the leaseholders before considering third party buyers, provided specific conditions are met. This process begins with the issuance of a Section 5 notice to all qualifying leaseholders.
The Section 5 notice will inform you whether the freeholder plans to sell their interest through a private sale or public auction. Once the notice is issued, leaseholders have a limited window to act—just two months from the date of the notice to respond.
Key Considerations When You Receive a Section 5 Notice
1. Evaluating the Purchase Price
The Section 5 notice will state the price the freeholder is willing to accept. Leaseholders need to assess if the price is reasonable and within their financial means as the offer would not be negotiable.
2. Gauging Leaseholder Interest
For the Right of First Refusal to proceed, over 50% of the leaseholders must express interest in purchasing the freeholder’s interest. Communication with your neighbours is key to understanding the level of interest and previously discussed plans for such a purchase.
3. Responding Within the Deadline
Time is of the essence when dealing with a Section 5 notice. Leaseholders only have two months to decide if they wish to accept the freeholder’s offer, and respond. Achieving consensus among a majority of leaseholders (more than 50%) can be challenging, especially in larger buildings. It’s crucial to determine if the timeline is feasible for organising and making a decision.
Seeking Professional Guidance
If you and your fellow leaseholders decide to proceed with the purchase, it is advisable to seek expert legal advice. At Paul Robinson Solicitors LLP, we have extensive experience representing both leaseholders and freeholders in Right of First Refusal transactions and can assist you every step of the way.
If you’ve received a Section 5 notice and need expert assistance or have questions about the process, please get in touch with us. reduce disputes arising between leaseholders/freeholders and/or landlord/tenant.
If you want to know more or want to speak to a member of our team, please get in touch below.
