“If you want to sell the freehold of a property containing flats, as a landlord you are legally obliged to offer the freehold to the qualifying tenants before disposing of it. To do this you must provide any qualifying tenants with the Right of First Refusal (‘RFR’).
RFR is served in the form of a Section 5 Notice. It is a written notice that notifies tenants of your intention to sell and the price the freehold is being offered for. RFR is provided by Part 1 of the Landlord and Tenant Act 1987 (the 1987 Act) as amended by the Housing Act 1996.
RFR is only applicable if the freehold contains at least two flats, no more than 50% of the building is in non-residential use, and more than 50% of the flats are held by ‘qualifying tenants’*.
What are the consequences of not providing notice?
It is a criminal offence to sell a freehold without first offering RFR to the qualifying tenants as it is a breach of the obligations set by Landlord and Tenant Act. Not providing the proper notice to tenants can result in criminal conviction and a fine of up to £5,000.
Following the disposal of a freehold, the leaseholders have the right to demand information on the sale, and the option of forcing the new landlord to sell the freehold to them at that price, if the landlord did not comply with their obligation to offer RFR.”