- Landlords Moving On20 April 2007
Rights of First Refusal
Where a Landlord intends to dispose of his freehold interest in a property he may be required to offer the interest to residential Tenants in the property before offering it to the open market. If the Tenants choose to purchase the interest, the Landlord must sell to them. This right of first refusal does not allow for Tenants to force a sale. Instead it gives them priority to purchase when the opportunity occurs.
When do rights of first refusal arise?
The Landlord must be disposing of his freehold interest and his property has to adhere to certain conditions. The property must have:
1. at least 2 flats;
2. more than 50% of it used for residential purposes; and
3. more than 50% of it owned by qualifying Tenants (e.g. Tenants with a long residential lease).
Who needs to be aware of the statutory requirements and why?
Landlords must keep Tenants informed regarding any sale by serving Notices. Notices must be served in accordance with statutory requirements.
Any failure to serve Notices could result in a criminal conviction and a fine of up to £5,000. Servicing Notices incorrectly could also be punishable.
Tenants must receive Notices from their Landlord if a sale is proposed. They must respond to any Notice within requisite time limits. If they are concerned procedures have not been followed they can protect their position by requesting further information.
Failure to adhere to the time limits will amount to the Tenants losing their right to purchase the freehold, even where the failure was caused by a lack of awareness.
Landlords and Tenants need to be aware of the implications of the rights of first refusal so they are not penalised for non-compliance with statutory procedure or suffer other loss.
What to do next…
If you are a Landlord or Tenant requiring practical solutions or any further information, please contact Mark Dewey at Hallett & Co.
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