Right of First Refusal
What is the right of first refusal?
When a landlord is planning to sell a building which contains residential flats, he must, before entering into a contract with the purchaser, give the tenants of those flats the opportunity to purchase the building on the same terms as the proposed purchase. He must serve a notice on each of the tenants who are then given a period to consider whether to take up their right of first refusal. Failure to serve the notice and/or selling prior to its expiry is a criminal offence.
Obviously if you are a landlord it is very important for you to take advice on this and make sure you fulfil your obligations.
Do I/does my building qualify?
In order for the right of first refusal to apply the building in question must contain at least two flats and no more than 50% of the building may be in non-residential use. Further, more than half of the flats in the building must be held by qualifying tenants. The definition of qualifying tenants is different from other areas of leasehold enfranchisement since it includes regulated tenants in addition to long leaseholders. It does not, however, include assured or shorthold tenants, or business tenants.
"Building" is not defined by the legislation but the courts are likely to have regard to the definitions in other leasehold enfranchisement legislation i.e. a separate building or, in some cases a part of a building which may be divided vertically from another part.
Problems may arise where the landlord is seeking to dispose of several blocks on an estate. The general rule in such a case is that the landlord will have to give each tenant the opportunity to purchase the block in which their flat is found. There must be at least two flats in the building, so the right does not apply to houses occupied as one unit - but will, of course, apply to a house which has been converted into flats.
The right may not arise if the landlord himself lives in the building.
If you would like to discuss your case with us please call Ash Oberoi, Claire Allan or Leigh Shapiro on 020 7553 9000.