Where a landowner intends to sell his premises, his tenant may have a right of first refusal under the Landlord and Tenants Act 1987 before it is offered to a third party.
In order for the tenant to qualify for first right of refusal, the building must satisfy the following criteria:
Assured and assured shorthold tenancies does not qualify for this right, nor do non-residential tenancies. Leaseholders qualify as do some fixed or periodic tenancies. A tenant of three or more flats will not qualify for any of the flats.
It also depends on the landlord as to whether the first right of refusal applies. The landlord must be the person that pays the ground rent and can take possession of the building when the tenancy ends. They cannot be a council, housing association or charitable housing association landlord. A resident landlord that has lived in the building as his only/primary residence for at least 12 months will not qualify. If the building is not a purpose built block of flats (for example, it is a converted house) then this also does not qualify.
If the landlord sells the property to a third party without giving the qualifying tenants a first right of refusal, then these tenants can serve an “information notice” on the new owner requesting details of the sale and this has to be providing within a month. The new owner can then be required to sell the freehold to the tenants on the same basis that he purchased it.
The landlord has various options for disposing of the property:
The most common are the first two options.
For this option, the process is as follows:
Where there is non-acceptance of the right of first refusal then the landlord is free to sell the property on the open market to a third party. It must not be sold within the first 12 months for an amount that is less than the amount stated in the section 5 offer notice.
For sale by auction there is a different process:
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