Recent changes in property law have given many owners of leaseholds in England and Wales the right to become their own landlord. A collective of leaseholders may now purchase their landlord’s interest in the block if the landlord wishes to sell. The landlord has to give them the opportunity to buy before selling it to anyone else – this is known as the ‘right of first refusal’ – it was introduced by the Landlord and Tenant Act 1987 and strengthened by the Housing Act 1996. It is a criminal offence if the landlord fails to do what is required. Those thinking of buying leasehold property would do well to consider what their future options are regarding the freehold.
Can any leaseholder purchase their freehold?
Those who qualify include long leaseholders or regulated tenants who hold their tenancy directly from the person wishing to sell. Those excluded include: protected shorthold tenants; tenancies terminable on the cessation of employment; assured tenants; tenants under agricultural occupancies; tenants of three or more flats in the premises being sold; sub-tenants of qualifying tenants; and most business tenants.
Does my property qualify?
The right of first refusal applies to the disposal of any property (not just a purpose-built block) containing two or more flats held by qualifying tenants, provided that more than 50 per cent of the flats in the property being sold 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 not more than 50 per cent of the internal floor area (not counting common parts – staircases, landings etc) is in non-residential use. Properties held by resident or exempt landlords are not subject to the right.
There are, however, circumstances where a property containing flats may change hands without triggering the first refusal procedure. Transfers within a family or trust are exempt; as are transfers in some other special circumstances, such as the exercise of certain options, compulsory purchase orders, bankruptcy, divorce etc, or a disposal to an associated company, provided that the company has been associated with the landlord for at least two years.
Where can I find out more?
Contact your solicitor or a qualified surveyor or valuer for information on how your particular circumstances may affect the right to freehold purchase. You can also get a copy of a booklet called Long leaseholders – your rights and responsibilities, published by the Department of Transport, Environment and the Regions, by writing to: DETR, HPRS Division, 2/J4, Eland House, Bressenden Place, London SW1E 5DU. Telephone 020 7944 3462.