If you own a leasehold property, for example, an apartment in a purpose-built apartment block or a flat in a converted house, your landlord has considerable control over the amount you pay in ground rent and service charges, what provisions are included in your service charge and how the common and shared areas in the building are used. For example, we are seeing an increasing number of landlords selling their freehold interest in the building to developers who seek to make a profit by converting the loft space and shared areas into additional living accommodation.
Needless to say, if you find that your landlord is going to sell their freehold interest in your building, it can be an incredibly worrying time. However, you may not realise that very many landlords are legally obligated to offer the leasehold owners in their building the option to join together with the other apartment owners to purchase the freehold title of the building before they offer to sell it to anybody else.
In order to have a right to first refusal, the situation, you and your apartment must fulfill certain criteria.
The building must be “qualifying premises”, which requires the building to contain at least 2 flats owned by “qualifying tenants” and the flats owned by “qualifying tenants” must constitute over 50% of the flats contained in the building.
A “qualifying tenant” is any person who occupies a flat under a tenancy. This could be the long lease of, for example, 999 years, that you purchased, or an assured short-hold tenancy agreement if you let the property to tenants.
However, any of the flats in the building which are owned or occupied by your landlord or owned by somebody that owns three or more flats in the building cannot count towards the minimum of 2/50%.
If the building also comprises of residential apartments and commercial units, for example, if your apartment is above a shop or office, the residential apartments in the building must take up at least 50% of the building.
In order to have the right of first refusal, your landlord must also be a private person or a company, but cannot be a Local Authority or Housing Association.
Lastly, the way in which your landlord is relinquishing their ownership of their freehold interest in the property also has to constitute a “relevant disposal” – this means that your landlord is obliged to offer you first refusal to purchase the freehold if he sells, transfers or gives away his freehold interest in the building, as long as the new landlord is not a spouse or family member of your landlord or a charity.
If your landlord decides to sell or transfer his freehold interest in the building, they are legally obliged to notify you of their intention and give you the opportunity to buy it with your fellow leasehold apartment owners. If you receive such a notice, you will only have a limited time in which to respond and your response must be made in a specific format. If you fail to respond in the required way by the deadline, you will forfeit your right to first refusal.
If your landlord fails to give you your right of first refusal before he sells, you can apply to the courts for the sale to be ‘undone’ and the freehold estate in the building to instead be sold to you and your landlord can incur criminal and civil liability, but again, there are deadlines for you to take action.
If you receive notification from your landlord that they are going to sell or if your landlord sells without giving you first refusal, please do get in touch with our property team as quickly as possible so that we can advise you on exactly what action to take.
For further information on anything mentioned in this article contact us.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
