Right of First Refusal
Collectively accept an offer to buy your landlord’s interest
The owner of a building containing flats must usually offer their interest in the building to the flat owners prior to transferring it to a third party. The process that must be followed is called the ‘right of first refusal’.
The owner of the building must offer their interest to the flat owners at a fair price as they cannot offer it to a third party for any less. It may therefore be an ideal opportunity for the flat owners to buy the their landlord’s interest. The right of first refusal also applies to buildings that the right to collectively enfranchise does not, meaning that in some cases it may be the flat owners’ only opportunity to buy their landlord’s interest.
What do we have to pay?
The flat owners need only pay their own legal fees (and possibly valuation fees) and whatever fees form part of their landlord’s offer.
If no legal or other fees form part of the offer then the flat owners need only pay the landlord’s legal fees should they accept the offer but then later decide not to proceed to complete the purchase of the landlord’s interest.
What interest must be offered?
If the flat owners’ immediate landlord is the freeholder, then they must be given the opportunity to obtain the freehold interest. If there is a head landlord (sometimes called an intermediate landlord) then it is the head leasehold interest that must be offered.
What offer must be made?
The landlord is at liberty to auction their interest, in which case the notice given to the flat owners will ultimately give them an opportunity to buy the interest at the price set by the highest bidder. Where the landlord intends to transfer their interest to a third party privately (not by auction) then the notice given to the flat owners must set out the core terms of the landlord’s offer, including the price.
What are the steps after receiving a notice?
Unless the landlord intends to go to a public auction they must give the flat owners at least two months to accept their offer. The flat owners must also be given a further two months (so a total period of four months) to nominate a purchaser.
To accept the landlord’s offer more than 50% of the flat owners in the building must give the landlord a formal notice of their acceptance prior to the deadline given in the landlord’s offer notice. Once the right of first refusal has been accepted the parties move towards completion, with the landlord usually sending the flat owners a contract and giving them a further two months to sign and return it.
Further information
Extensive information about the right of first refusal can be found on the Leasehold Advisory Service website.
We typically charge £750 (in total not per flat) for helping the majority of flat owners in a building of up to six flats to accept their landlord’s right of first refusal offer and to convey the landlord’s interest to them. Our fee does not include dealing with any dispute about service charges that might arise as part of the purchase.
However, our prices depend the complexity of the offer you have received. If you email us information about your building and the landlord’s offer, we will be able to provide you with a detailed quote. There is no obligation to instruct us.
The factors that influence our prices are:
- The number of participants
- The size of the building
- Whether the offer is private or by auction
- The complexity of the terms of the offer
There are typically third party costs (such as Land Registry fees) of around £60 to pay in additional to our fees.
We are not VAT registered and so there is no VAT payable on our fees.
Sample pricing
Where four flat owners in a building receive a landlord’s offer to sell them the freehold and there are no other stipulations in the offer than the price then we would typically charge £750 to help the flat owners accept the landlord’s offer and convey and register the freehold interest.