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If you have any questions relating to this article or if you have any queries concerning the Right of First Refusal, please contact Darryn Harris on [email protected]
Landlords who want to sell the freehold of existing residential and mixed-use properties usually have to offer the leaseholders the first chance to buy it. This is known as the right of first refusal.
The right of first refusal applies to the disposal of any property containing 2 or more flats held by qualifying tenants, provided that more than 50% of the flats in the property are held by qualifying tenants. Where a property being sold contains a mixture of flats and non-residential accommodation, such as shops or offices, the qualifying tenants (but not the others such as business tenants) have the right of first refusal if no more than 50% of the internal floor area (not counting the common parts-staircases, landings etc) is in non-residential use.
If the landlord fails to do so, they will be committing a criminal offence while the purchaser may also be required, on an application to the Court by the tenants, to transfer his interest to the tenants even if they have already transferred it to a third party.
A Qualifying Tenant is a tenant who is a long leaseholder who holds their lease directly with the person wishing to sell their interest. Shorthold tenants, assured tenants, business tenants, or an otherwise qualifying tenant who owns three or more flats in the same building will not be Qualifying Tenants.
While the majority of disposals will be caught by the provision of the LTA 1987, but some are exempt, for example:
(a) A grant of a single tenancy of a flat
(b) A disposal to an associated company: this is where the interest is transferred as an asset to another company, which has been associated with the parent company for at least two years
(c) disposals arising from collective enfranchisement
(d) a sale by two or more persons of the same family to a different combination of the same family
(e) sales to the Crown or to Government departments
(f) A transfer of an estate or interest held on trust for any person where the disposal is made in connection with the appointment of a new trustee or in connection with the discharge of any trustee.
This is not an exhaustive list.
Yes:
The Right of First Refusal can be a difficult process with many traps for the unwary.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.
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If you have any questions relating to this article or if you have any queries concerning the Right of First Refusal, please contact Darryn Harris on [email protected]
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