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Right of First Refusal - what are my rights?

Right of First Refusal: What are my rights?

In ‘legal terms’ the right to be offered first refusal is where a landlord of premises comprising solely or partly of flats wishes to dispose of its reversionary interest is provided in Part 1 of the Landlord and Tenant Act 1987 (“the Act”).

The landlord is prohibited from making the disposal unless it first serves all Qualifying Tenants of the flats in the premises with an offer notice under section 5 and 6-10 of the Act.

For the right to apply a number of criteria must be met:

  • The premises must consist of the whole or part of a building; and
  • The premises must contain two or more flats held by qualifying tenants; and
    • A tenant is a qualifying tenant unless his tenancy is (i) a protected tenancy; (ii) a business tenancy under Part II of the Landlord and Tenant Act 1954; (iii) a tenancy terminable on cessation of employment; or (iv) an assured tenancy under the Housing Act 1988.  
  • The number of flats in the premises held by qualifying tenants must exceed 50  per cent of the total number of flats and the internal floor area of any non-residential parts of the premises must not exceed 50 per cent of the internal floor area of the whole of the premises.
  • The landlord must not be an exempt landlord:
    • Local Authorities, the Housing Corporation and private sector resident landlords Participating Tenants must form an RTM Company. It must be a private company limited by guarantee and have the correct Memorandum and Articles of Association

Relevant Disposal

Any disposal by the landlord of any legal or equitable estate or interest affecting any premises to which the Act applies, will be regarded as a relevant disposal. Most transfers including surrender of freehold or lease reversion, entering into a contract to create or transfer an estate or interest in land, whether conditional or unconditional, the grant of an option or right of pre-emption will constitute a relevant disposal.

Offer Notice

The form of notice depends on the type of disposal. The notice is required to set out the terms on which the landlord is proposing to dispose of the premises. The landlord must give all qualifying tenants a period of time to accept or reject the offer.

If the offer is accepted, the landlord must dispose of the premises to the qualifying tenants following a procedural timetable leading to exchange of contracts or withdrawal. Failure to follow the timetable will lead to the loss of the right of first refusal.

If the offer is rejected the landlord can make the disposal to another party but only on the same terms as set out in the offer notice

If a landlord fails to offer its interest to the tenants or sells to a third party at a lower price than that offered to the tenants, the tenants can compel the new owner to sell the freehold back to them at the price it paid for it.

It is a criminal offence for a landlord not to serve the offer notice and can become liable to criminal prosecution and, on conviction to a fine up to £5,000. 

If you would like to discuss any of the above or any of your rights as a leaseholder, please contact Bukola Obadun-Craigs


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