For numerous reasons there may come a time where your freeholder wishes to sell their interest in the building which you’re apartment is in. When this is the case, if the building meets certain criteria, the freeholder is legally obliged to offer the leaseholders within the building the right of first refusal, by issuing a section 5 notice.
What is Right of First Refusal?
If certain criteria apply, your freeholder my be legally obliged to offer to sell it to you and the other leaseholders of the building first before considering offers from outside third parties. This is known as the Right of First Refusal.
If your freeholder is legally required to offer the interest to you first, this is done by a formal section 5 notice being issued to all qualifying leaseholders of the building. The notice will detail whether the interest is being disposed of by contact or by public auction. Once the notice is served leaseholders must work quickly with their fellow leaseholders to decide if they wish to purchase the interest as they only have 2 months from the date the notice is served to respond.
Considerations to make upon receiving a Section 5 notice:
- The cost of purchasing the interest:
The Section 5 notice will contain the amount the freeholder is willing to accept as the purchase price. Leaseholders must therefore consider whether the price is fair and affordable. - The deadline for an acceptance notice to be served:
Upon receipt of a Section 5 notice, leaseholder only have two months to respond, so it is crucial to act quickly. To proceed, the majority of leaseholders (over 50%) must be in agreement to purchase the interest and depending on the size of the building, coordinating the agreement of a large group can be challenging. It is therefore important to consider whether the timescales can realistically be met. - Are 50% or more of the leaseholders within the building interested in purchasing?:
As with collective enfranchisement, the majority of the leaseholders within the block must be interested in purchasing the interest in order to respond with an acceptance notice. You should therefore consider whether you need to communicate with your neighboring leaseholders to find out what the level of interest is, or have you previously been in discussions with other leaseholders around proceeding with enfranchisement.
If you and the other leaseholders of the building wish to proceed with purchasing the interest on offer, it is important to seek proven reliable expert advice. Choosing the right solicitor can help make a complex process feel more straightforward. Here at Brady Solicitors we have extensive experience of acting for both leaseholders and freeholders in Right of First Refusal transactions and assist you throughout the process.
