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Leasehold Enfranchisement

Right of First Refusal Claims

The Landlord and Tenant Act 1987 gives residential tenants a right of first refusal when their landlord wants to dispose of his interest in a property.

There are two ways in which the landlord may sell his interest in the property:

  1. By offering the right to the qualifying tenants; or
  2. By disposing of it at auction.

Both courses of action require certain procedures to be followed. The Leasehold Enfranchisement team can be consulted on specific cases.

What happens if the landlord fails to comply?

If the Landlord fails to follow the procedures set out in the legislation, or if he sells on better terms after the qualifying tenants have rejected the offer, the Landlord commits a criminal offence punishable by a fine (maximum £5,000 at present).

It is vitally important for Landlord and prospective purchasers to take advice on the statutory procedures so as to ensure their obligations are fulfilled.

Do I qualify?

You will be a qualifying tenant if you are long leaseholder or a regulated tenant, if you hold your tenancy directly from the person wishing to sell. There are other categories of tenants who also qualify.

Which tenants do not qualify?

The following categories of tenants do not have the right to first refusal:

  • Protected short hold tenants
  • Tenancies terminable on cessation of employment
  • Assured tenants
  • Tenants under agricultural occupancies
  • Tenants of three of more flats in the premises being sold
  • Sub-tenants of qualifying tenants
  • Most business tenants

Does your property qualify?

The right of first refusal applies to the disposal of any property (not just purpose built-blocks) containing two or more flats held by qualifying tenants providing that more than 50% of the flats in the property being sold are held by qualifying tenants.

Where a property being sold contains a mixture of flats and non-residential premises like shops and/or offices, the qualifying tenants have the right of first refusal if no more than 50% of the internal floor area (not counting common parts – staircase, landings etc) is in non-residential use. Properties held by residents or exempt landlords are not subject to the right.

Which landlords’ must comply?

Most landlords must comply with the right of first refusal procedure however there are exceptions:

  • Resident landlords in non-purpose built blocks of flats who occupy a flat in the premises as their only or principle residence and has done so for a period of at least 12 months ending at the date of disposal; and
  • Landlords who are specifically exempted such as local authorities, new town development corporations, registered housing associations etc

Are there instances where the right of first refusal may not be triggered?

Yes there are. For example, transfers within a family or trust are exempt as are transfers in some other special circumstances such as the exercise of certain options, compulsory purchase orders, bankruptcy, divorce etc or a disposal to an associated company provided that the company has been associated with the landlord for at least two years.

Rights of first Refusal is a complicated area of law and specialist advice should always be taken.

If you are a Leaseholder or a Landlord and wish to discuss your case with us, please contact:

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