The Right to Manage
Leaseholders of a block of flats have the right to take over the management of their building from their landlord.
Under the Landlord and Tenant Act 1987, a landlord who wishes to sell their interest in a block of flats must – subject to a limited number of exceptions – first offer their interest they are selling to the tenants in the block before they can sell it to a third party. This is known as the “Right of First Refusal”.
Advising on the Right of First Refusal is more than just serving a notice. It is a very specialist discipline requiring expert knowledge and experience to avoid the pitfalls that could result in the leaseholders losing the right to acquire the landlord’s interest, or even the landlord potentially committing a criminal offence.
Our specialist Leasehold Enfranchisement solicitors are experienced at guiding our clients through the process.
The Process of Buying the Freehold of a Block of Flats – The Right of First Refusal
Buying the freehold of a block of flats must be undertaken by more than half of the occupants. The landlord must serve an “Offer Notice” on each of the tenants in the block at least two months before they propose to sell their interest. The Offer Notice must set out all of the principal terms of the proposed sale and offer to sell the landlord’s interest to the leaseholders on the same terms.
The leaseholders then have until the end of that two-month period in which to serve a notice accepting that offer, called an “Acceptance Notice”. If the landlord intends to sell their interest at an auction then, if the leaseholders accept that offer, the auction will still take place but the leaseholders will have the option of buying the freehold of their block of flats at the terms that were reached at the auction.
The Acceptance Notice may only be served if more than half of the qualifying leaseholders take part. If the leaseholders do not serve an Acceptance Notice within the two-month period, the landlord may sell their interest to a third party, but only on the terms set out in the Offer Notice. If the landlord wishes to sell their interest on different terms, they must serve a new Offer Notice and the leaseholders will have a further chance to serve an Acceptance Notice.
If the landlord sells their interest without first complying with the Right of First Refusal, they will commit a criminal offence and may be liable for an unlimited fine. The leaseholders may also be able to apply for an order that the landlord is transferred to the leaseholders on the same terms as it was transferred to the buyers.