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Right of First Refusal - the basics

If you own a leasehold flat and your landlord wants to sell their ‘interest’, they usually have to offer it to you and the other leaseholders first. This is known as your ‘Right of First Refusal’ (RFR). ‘Interest’ includes things like the freehold or the ‘head lease’ (the lease from which all the others were granted).

If you qualify, the landlord must tell you the price and terms for buying their interest. You can only accept or reject their offer, you can’t negotiate a different one.

If you accept their offer, you must follow certain legal steps and time limits to complete the sale. The sale will fall through and the landlord can sell to someone else if you don’t.

If you reject the offer, the landlord can make exactly the same offer to someone else. However, if any part of it changes, they must offer it to you again.

Get professional advice if your landlord sold their interest without first offering it to you, you might be able to buy it from the new owner.

Qualifying for the Right of First Refusal

To qualify, you and the other leaseholders need to meet certain conditions. These include:

• you are a regulated tenant or you hold a ‘long lease’, usually this means it was originally granted to last more than 21 years
• you don’t hold a business or agricultural lease
• you don’t own more than three flats in the building

The building must meet these three conditions:

1. it contains at least two flats
2. 50 per cent or less has a commercial use – for example, a shop
3. more than 50 per cent of the flats are owned by leaseholders who qualify

Exceptions

Even if you meet all the conditions, there are times when the RFR doesn’t apply. For example, if the landlord:

• is a local authority, housing association or registered social landlord
• sells or transfers (gives) the freehold to a member of their family

Download ‘The Rights of First Refusal for leasehold property - a guide‘ for the full conditions and exceptions.

• Download 'The 'Right of First Refusal' for leasehold property - a guide' (PDF, 300K) Opens new window

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How much will it cost?

You might have to pay the landlord’s legal costs and/or compensation if the sale falls through.

Getting help and advice

Get a professional (like a solicitor) to help you buy the landlord’s interest. They can check you qualify and do the legal paperwork for you.

You can get free advice from the Leasehold Advisory Service or Citizens Advice.

• Find your local Citizens Advice Bureau

• Leasehold Advisory Service - online enquiry form

• Leasehold Advisory Service (LEASE)

Basic steps if the landlord wants to sell the freehold

The basic steps for buying the freehold are shown below, the steps are different if the freehold is being sold at auction. For more detail, download ‘The Rights of First Refusal for leasehold property - a guide‘.

Step one – the landlord’s offer

The landlord must tell you and the other qualifying leaseholders that they want to sell the freehold. They will send you a ‘Section 5 Notice’ confirming things like:

• the price for the freehold
• a deadline for you to accept the offer, you must be given at least two months

Step two – accepting the landlord’s offer

To accept the landlord’s offer:

• more than 50 per cent of the qualifying leaseholders must agree to it
• write to the landlord and accept the offer before the deadline
• confirm a ‘nominee person’ within two months of accepting the offer using a ‘Nomination Notice’

A nominee person will own the freehold and is the main contact for dealing with the sale. It can be a person, group of people or company.

Step three – completing the sale

Within one month of getting the ‘Nomination Notice’ the landlord must send the nominated person a contract for the sale of the freehold. This will confirm things like the price and the ‘requisite deposit’ (the amount needed to secure the sale).

The nominated person then has two months to sign and return the contract and send this with the requisite deposit to the landlord. The landlord then has seven days to exchange contracts and complete the sale.

• Download 'The 'Right of First Refusal' for leasehold property - a guide' (PDF, 300K) Opens new window

• Help with PDF files