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Do I need to send a Notice of Right for First Refusal to my tenants?

 

 

 

 

Zoe Davis | Trainee Solicitor

The Landlord and Tenant Act 1987 (“the Act”) provides certain protections for leaseholders in larger freehold properties.  

One such protection provided by the Act is that the freehold landlord or leasehold properties must provide notice of their intention to dispose of a property should they wish to sell the freehold title.  This notice is called the Notice of Right for First Refusal.  

What is a Notice of First Refusal? 

Once such a notice has been sent, all leaseholders within the property are then entitled to put forward their interest in purchasing the property prior to it being sold to a third party.  For a notice to have to be served, certain requirements must be met. These requirements are set out in various aspects of the Act.

Do I need to serve a Notice of First Refusal?

For a landlord to be required to serve notice under the Act the requirements under Section 1(2) of Part 1 of the Act must apply. These requirements are that:-

  1. The premises in question must consist of a whole or a part of a building; and
  2. The premises must contain two or more flats held by qualifying tenants; and 
  3. The number of those flats held by such tenants must exceed 50% of the total number of flats contained within the premises.

In addition to Section 1(2), the Act also states that the Right to First Refusal does not apply if any parts of the premises are occupied or intended to be occupied for the purposes other than those that are residential and the internal floor area of those parts exceeds 50% of the internal floor area of the premises.  Under this part of the Act the internal floor area of the common parts is disregarded.  Even if the number of flats held by residential qualifying tenants exceeds 50%, the internal floor plan of those residential flats must also be over 50%.

The definition for qualifying tenants is dealt with by Section 3 of Part 1 of the Act. This states that a tenant will not qualify under the Act if:- 

  1. The tenancy is a protected shorthold tenancy as defined in Section 52 of the Housing Act 1980;
  2. The tenancy is one to which Part 2 of the Landlord and Tenant Act 1954, that being a business tenancy;
  3. The tenancy is terminable on the termination of employment; or 
  4. The tenancy is an assured tenancy or assured agricultural occupancy within the meaning of Part 1 of the Housing Act 1988.  

What happens if I fail to serve a notice? 

If you fail to serve a notice under the Act, the leaseholders are entitled to certain rights under the Act.  These can include rights to information regarding the transaction and even the right to reverse the transaction in favour of the leaseholders.  This could lead to you and the new landlord losing ownership of the property and having to pay the leaseholders legal costs.  The leaseholders can, if you refuse to reverse the transaction, take you to Court.  

How can I make sure I do everything right in my transactions? 

The law around landlord and tenant or leasehold and freehold can be extremely complex. There are lots of requirements to ensure you comply with the statute and your duties under it.  To ensure you do everything you are supposed to, you should make sure to hire a solicitor to help you with the transaction. 

If you require any advice regarding landlord and tenant disputes, please contact our Litigation Team for all of your queries. 

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