Our Right of First Refusal Service

Under the Landlord and Tenant Act 1987, where a landlord is proposing to sell his interest in a building containing flats, the right of first refusal may exist, and by law, the landlord must first offer it to the qualifying tenants before offering it on the open market.

Formal notices must be served on the qualifying tenants telling them that he intends to sell the freehold and must provide time for them to consider the offer. During that time, he cannot sell it to another contracting party nor offer the interest to anyone else at a price less than that proposed to the tenants or on different terms.

Right of first refusal is a complex area of property litigation law with criminal sanctions if the first refusal clause is not correctly complied with.

Right of First Refusal

Myerson Solicitors can advise you on:

  • Advising whether a property or transaction is subject to the right of first refusal.
  • If you are the freeholder and you are looking to dispose of your interest, we can prepare the notices pursuant to section 5.
  • Whether you qualify for the right of first refusal and the timescales you need to act in.
  • What you should do if there is another prospective purchaser involved and prepare the relevant notices.
  • Following a disposition where the property is subject to the right of first refusal advise how to compel the resale and or maintain your right.
  • Advise how to structure a development so that the right of first refusal is not triggered.

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Right of First Refusal Case Studies

Case Study 1

Client Intro: Our Client purchased the freehold land of 3 flats. The freehold also included an additional fourth flat. Unfortunately, no section 5 notices were served on the qualifying tenants, and the client was not advised they were required.

Case overview: Following the purchase of the property, the qualifying tenants served upon our client notices regarding the transaction and then compelled our clients to transfer the property back to them. We advised our client concerning the additional notices and how best he could protect his position. Ultimately, the client transferred the property back to the qualifying tenants.

Case Study 2

Client Intro: Our client purchased the freehold title subject to commercial premises and residential flats. As the freehold comprised of more than 50% residential flats, the transaction triggered the requirements of the Landlord and Tenant Act 1987. 

Case Overview: Section 5 notices were served by the seller due to the requirements of the Landlord and Tenant Act 1987. We advised our client on the validity of the section 5 notices to enable our client to proceed with the transaction. Our client was not satisfied that the section 5 notices were valid or had been served on all qualifying tenants. Therefore, we advised our client to serve section 18 notices to provide him with more comfort to proceed. 

After completing the transaction, we further advised our client that he was required to serve as a new landlord on the other notices.

Case Study 3

Client Intro: Our client is a developer who built a residential estate comprising 69 apartments and three freehold houses. Our client is selling the freehold.

Case Overview: Section 5 notices were required due to the nature of the transaction. We advised our client on the section 5 notices, what information was required and how to serve the notice to ensure they were valid.

How does the right exist?

Certain requirements must be met for the right of first refusal to exist.

The premises must contain at least two flats, at most 50% of the premises must be in non-residential use, and qualifying leaseholders must hold more than 50% of the flats.

The right of first refusal clause does not apply to all landlords; for example, most housing authorities, registered social landlords and charitable housing trusts are exempt from the act.

The right of first refusal only applies to qualifying tenants. A qualifying tenant must have a tenancy. However, some tenancies are excluded from the definition. A tenant with three or more flats in a building will not be a qualifying tenant and, therefore, not entitled to the first right of refusal.

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What is a relevant disposal?

The majority of disposals will trigger the right of first refusal. This typically includes the sale or transfer by the landlord of his freehold interest, but it could also include granting a new head lease or a new interest in the building.

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I am a landlord and want to sell my interest; what do I do?

If all conditions are satisfied, the landlord must serve an offer notice referred to as a section 5 notice. Breach of this obligation by the landlord, or his agent, is a criminal offence punishable by a level 5 fine on conviction (£5000). 

The legislation requires the landlord to serve the notice on the qualifying tenants and provides that the landlord has complied with its contractual obligation if the notice is served on at least 90% of the qualifying tenants.

Our Real Estate Litigation Team can assist you with different types of notices depending on the type of disposal.

I am a new landlord; do I need to serve any other notices?

Any new landlord of a property containing at least one dwelling must inform tenants of his name and address as a requirement of the Landlord and Tenant Act 1985. Failure to serve notice is subject to criminal prosecution and is liable on conviction to a level 4 fine on the standard scale, currently £2,500.

Where the building is subject to the right of first refusal, the new landlord must also serve a notice under section 3A of the Landlord and Tenant Act 1985. This notice must be served irrespective of whether a section 5 notice was served.

The purpose of the section 3A notice is to alert the tenants to the possibility of a breach of the contractual right of first refusal.

I am a building tenant, and my landlord has recently sold the freehold interest. I didn’t receive a notice. What can I do?

When a tenant finds out that they have a new landlord and thinks that the transfer may not have occurred following the right of first refusal, the requisite majority (i.e., more than 50%) of the qualifying tenants may serve a section 11A notice on the new landlord. A section 11A notice allows the tenants to seek certain information. It must be served within four months of the section 3A notice being received or on the date the tenants received any other information indicating that disposal had taken place.

Once the section 11A notice has been served on the landlord, they must respond to the interested parties within one month.

Suppose the qualifying tenants can show a breach of the statutory requirements. In that case, they can require the landlord to give effect to the contract for disposal as though it had been entered into with the nominated person rather than the purchaser, or they can compel the new landlord to sell its newly acquired interest to them, on the same terms it has acquired it.

Our Real Estate Litigation Team can assist with serving the relevant notices required to ensure the acquisition of the nominated person can take place.

I am a freehold landlord and want to ensure the right is not triggered. Can I do this?

There are now only very limited opportunities for the avoidance of the act, which is due to the amendments brought in by the Housing Act 1996

As the act is complicated, our Real Estate Litigation Team can assist with advising you whether your circumstances will trigger the act or not.


Our Property Litigation Team

Home-grown or recruited from national, regional or City firms. Our property litigation lawyers are experts in their fields and respected by their peers.

Laura Pile

Laura Pile

Laura is a Partner and Head of our Property Litigation Team

Karen Taylor

Karen Taylor

Karen is a Senior Associate in our Property Litigation Team

Jennifer Hartley

Jennifer Hartley

Jennifer is an Associate in our Property Litigation Team

Vikki Wright

Vikki Wright

Vikki is a Solicitor in our Property Litigation Team

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