Right of First Refusal (RFR): Landlord and Tenant Act 1987

[yewtree]

Can anyone advise? I own a leaseold property. Recently, I found out that the existing freeholder sold the freehold of the property I own the lease in but they did not tell me. Now the new Freeholder is seeking to charge what we believe is an unreasonable charge for insurance.

Had the Freeholder told us that they were disposing of the freehold then we have ben interested in purchasing the freehold but, the fact they did not and we were unaware of any change until we received a demand from the new owners and had to write to the previous for clarification.

We thought that there was an obligation on the Freeholder to inform the lease owners of their intention to sell an offer them the first right to purchase ? Is this correct ?

Two further questions:-

a) can some one knowledgeable advise what our rights are ? as a consequence of the previous freeholders actions we lost out on the right to purchase freehold and now face increased costs ?

b) can we dispute the charges, If so do we need to pay first, then dispute to avoid action from the new freeholder or should we inform them that payment is pending resolution of any dispute via the LVT ?

We are a reasonable tennant but now feel cheated and about to be ripped off.

Any and all advice is appreciated. Thanks

Chris :(

[Poppy]

I recommend that you visit the Leasehold Advisory Service website at www.lease-advice.org.

[yewtree]

Thank you for guidance, it is appreciated. This is very useful. Only issue is that the guidance advises what are the minimum periods to be respected but not otherwise. To explain, the guidance indicates that a min of 2 months notice must be given but, what if the Freeholder gave notice at an earlier period then the property was sold. Having read the oligations on The FH, I can only assume that it is almost impossible to miss all the requirements which makes me wonder whether they issued notice 6, 9 12, ,etc months plus earlier and we purchased in between. This then begs the queston as to the following questions:-

a) where can one find out what notices were issued , if any. The FH is hardly going to tell you if a) they have sold the FH as no longer have an interest or they have not complied (shooting them self in the foot)?

b) What is the maximum period the FH can issue prior to selling ?

c) What are the legal obligations on the previous LH to tell you that the notices have been served assuming they have ?

Any thoughts anyone?

Thanks :confused:

[Markonee1]

Hi
I've had the LandlordZone listed as one of my 'favourites' for several years but not searched these forums until recently.
I am a leaseholder of an upstairs maisonette with 900 years left on the lease. My partner lives below me. Our ground rents are fixed at £7.50 per year. All land around us was divided up in the 1950's so there are no common parts.

We started to convert the building into a 4 bedroom semi. The freeholder raised no objections and agreed to sell the freehold at a disproprtionate £1500. We paid a deposit last year but the freeholder has not communicated further! I as nominee will probably have to take him to court.

We have blocked the communal doorway back up to ensure two flats still exist. We are stuck in a funny position because on the assumption of a speedy freehold purchase the council has rerated the maisonettes as a house.

Ten years ago the freehold changed hands as part of a package of 36 groundrents and a further (Unknown) quantity of 'premium' Surrey groundrents. We were not notified under Section 5 (landlords intention to sell) or section 3A. ('85 Act) or even Section 18.(prospective purchasers intention) We thought time had run out for the Right of First Refusal; but an extremely important case in the CA "Savva" 2005 wherein the 'obiter' of Lord Carnforth stated that the time will not run until tenants have been notified of their rights (via the 3A mechanism).The relevent disposal in the SAVVA case had occurred some 10 years earlier!
Sorry to waffle!

What I'm looking for is other leaseholders with 'Maxiwood' of Hove as a landlord to check their satisfaction.
I am also looking for some leaseholders who are insuring their flats/maisonettes through AXA under my landlord or otherwise. I am looking for premiums paid /sum assured for comparison purposes. I find the premiums extortionate and in our case inappropriate... Communal gardeners tools insurance! The landlord is also getting us to pay as part of the insurance a loss of rent cover to the sum of 20% of the buildings cover! This clause belongs with flat rentals.

One final oddity of our leases: The insurance is nominee/agency (usually house leases) and not block. Studying the 2002 Leasehold act says houses with nominee insurance clauses are free to insure with any bonafide insurance co.s 'House' is as defined in Pt 1 of the 1967 act. From the library (the only available resource for complete Acts prior to '88) states that a building may be a house even if it was built as or is split into flats.
There are some 500 other similar premiums out around the country at least according to my insurance certificate policy number and I'd like to find some of them.
:eek: I appologise once again for the long posting and it will not happen again. Thanks for the great site.

[tenant29]

1. I suggest that you proceed to buy the freehold immediately as your part conversion of building into one house has created a serious position- your building insurance as 2 flats may not be valid and you may have no cover.

You can make a compulsory purchase under the Commonhold & Leasehold Reform Act 2002. ( Online Information available by download from the Office of the Deputy Prime Minister - see " Long Leaseholders" )

2. Since the 2 flats ( GF + Maisonette ) pay ta otal of 15 pds annual ground rent - I would offer to buy the freehold at 20 x Ground rent = 300 pds and threaten to take the case to the Leasehold Valuation Tribunal if the sale price is not agreed.

3. What is the name of your freeholder and its managing agent ? You can check the freeholder's name from the Land Registry.

4. Then I suggest that you post another message on this forum giving -

Freeholder Name, Managing Agents name , Insurance company name , Policy number , starting date , premium paid and insured cover amount .

Asking if anyone is coved by same policy to contact you ?


5. I think Brighton & Hove Council & Hastings Council have a Leaseholder Association which may offer a way for you to contact other Leaseholders

[Markonee1]

Hi
Thanks for the response.
As previously posted in my 'essay' the Landlord is Maxiwood of Hove.This is also the Freeholder. It is run by a Mr Brotherton who I believe runs a letting agency. There is no management fee (there are no common areas except the road which is under a no obligation of repair by either tennant or landlord and grants 'Right of Way' for all purposes).
There are just groundrent demands and an annual request for us to buy insurance through AXA for which he gets a commission as an Agent of the same.The premiums are about £190 per 2 bed maisonette.
Quotes on the High st start at £90+
The properties are north of Bristol and were a 'conditional freebie' of the purchase of some lucrative (local to him) Surrey groundrents. He is 150 miles away.
He accepted groundrent last year in full knowledge of our part conversion. After last year when we gave him £350 as part payment towards the £2000 inclusive purchase price of our freehold... He tried to make us responsible for pro rata road maintenance [the first occupiers in the 70 year history of the road:eek:] and then never cameback to us. Last correspondence was August last year.
Subsequently I discovered that crucial case in the Court of Appeal that even the good folk at the LVT hadn't spotted. (Some of their decisions could be reversed!). So I wish to go down the route of RFR. I told him by letter that this could open the flood gates for other claims within his portfolio; but silence is all I get! Here it is, peruse at your leisure:
http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWCA/Civ/2005/1068.html&query=SAVVA&method=all

[tenant29]

Thanks for your information giving the website address showing the decision made by the Court of Appeal. Have you asked the LVT if this can be used by leaseholders to gain their freehold at the last sale price when the right of first refusal was not offered ?.

Another thought I have about your wish to contact other leaseholders insured under the same AXA policy number - I suggest you write to AXA and ask for confirmation about the premium paid, the tax paid , amount of insured cover and the commission paid to the landlord. ( and address of other properties insured under the same policy).

[Markonee1]

Sorry for the slow response by me to the help on this thread. I've just been sat these last few months twiddling my fingers and hoping the freeholder would respond to my demands to complete. It looks like I need to go to the County Court. I'll need to do this to establish that the right to the 'Right of First Refusal' exists. I'm sure it does as at no time were we offered the freehold under the same terms as the previous freeholder sold it.

Statute says price to be paid is as sold at the time and excludes the time value of money. As all land divided off there has been no added value; eg development land. LVT decisions show expected returns of about 12% during Christmas 1995 so the freehold values to these pairs of maisonettes are ball park £150.
The other way to get a sale from the freeholder is to challenge the insurance which includes the inappropriate rent cover of automatic payment of 20% of sum insured (about £160000 rebuild for the pair) which means a payout of £32000! Bastard [oops]... I see references to that costing about £99 per flat. I shall claim that back. I'm guessing for the pair of flats he owes nearly £800. Given that if I succeed in court then the other 17 pairs become eligible it could be costly for the freeholder!

Could some of you professional landlords recall approximately what the premium for rent cover has been for the last few years? Ideally back as far as the year 2000?

Additionally in the last insurance demand (request to buy actually; as he only nominates and gets his agency commission) there was a clause where gardeners tools are covered. There's not been a communal gardener since the creation of the leases in the 1950's.

My tradesman friend across the way says he can't insure his tools Could anyone put a cost to this?

One final interesting point is that there used to be 2 head leases (999 years) (Communal gardens era) 1943. Making our 950 year leases Under Leases and protecting freehold sales. However sometime before the 1980's (according to the Land Registry) they were reabsorbed back into common ownership with the freehold and exist only as an extract on the freehold title. I don't think this affects the disputed RFR which took place in 1996. Any thoughts please.

Holy cow another long post :mad:
Best regards
Mark

[tenant29]

Mark,

Building insurance is normally take out on based on "declared value" for building re-instatement purposes and the insured cover offered often includes an uplift of 20-30% to cover inflation of re building costs. Leases normally are worded to state the landlord has the right to decide what insured cover shall be included. So going to the LVT to challenge the building insurance may not result in a favourable decision for you.

If the value of your freehold was 150 pounds at the 1995 freehold sale, you should apply to get the County Court to transfer the freehold jointly to you and other flat owner under the RFR (at the same 1995 price ) as soon as possible. Alternatively, you could apply to the LVT for a compulsory purchase and get a determination of the price of the freehold ( I think about 16 x annual ground rent and it would be a lot less then the 1500 which you has agreed to pay ). Your rights are explained at website given below

http://www.communities.gov.uk/index.asp?id=1151618

[Markonee1]

[QUOTE=tenant29]
Mark,
Building insurance is normally take out on based on "declared value" for building re-instatement purposes and the insured cover offered often includes an uplift of 20-30% to cover inflation of re building costs. Leases normally are worded to state the landlord has the right to decide what insured cover shall be included. So going to the LVT to challenge the building insurance may not result in a favourable decision for you.

Thanks for the quick response. I'm a little confused with the above; and think you may have misunderstood my witterings:
The freeholder has an automatic payout clause in the insurance for 'loss of rent' at a sum of 20% of rebuild. His rent/ground rent is £7.50 per year. From what I understand this is cover that I would take out to cover the £500-600 rent that I could get if I rented out, and what 'buy to let' investors do! Why pay an annual premium of £99 to cover income of £7.50? I think it's a scam at no cost to the freeholder that could give an automatic golden egg...

The leases only ask "to insure buildings against loss or damage by fire" ... so strictly speaking with no comma after the word loss; insurance cover against losses other than by fire are not neccessary! (not that I wouldn't want the usual covers)

Regards
Mark

[tenant29]

The way forward to end this scam is to buy the freehold.

Have you checked out what steps are required on how to apply the "savva case judgement decision " to claim the freehold at the 1995 price ? I want to go this way for a block which I am presently organising to buy the freehold - hopefully at the 1995 transfer price.

[Markonee1]

The way forward to end this scam is to buy the freehold.

Have you checked out what steps are required on how to apply the "savva case judgement decision " to claim the freehold at the 1995 price ? I want to go this way for a block which I am presently organising to buy the freehold - hopefully at the 1995 transfer price.

I think it can only be achieved where there has been no improvement to the asset by the Freeholder... Funny how the principle of one not benefitting by an illegal act is overruled by statute!


It would appear that the weakness in the LVT armour has been this particular right (RFR). They only seem to have juristiction to argue terms of sale but it's a visit to the minor courts to establish that the right exists. The freeholder has been blanking me except when he took money last year under the pretext of a conveyance; which amounts IMO to part performance; entrapment; yada yada yada ;o)
Within our close there are 36 maisonettes constructed as 9 blocks of 4... As the the maisonettes are stacked in semi detached vertically severable pairs there are potentially 18 freeholds. Since the illegal freehold transfer, there are only about 8 of us who remember the change. I've spoken to 6 who all distinctly remember 'no offer' As 90% of the relevent qualifying tenants has to be served with section 5's or section 3's after the event of sale the notice fails as a complete portfolio. Minimum service would have needed to be 18 notices as the close is severable and in where severable premises contain less than 10 flats service needs all but one to be served. The LVT claims not to approve of this avoidance of service.
In the Savva Case obiter by LJ Carnforth says ALL tenants need service to satisfy essence of 85/87 Statutes.The 2 later amendments in 1996 and 2002 help subsequent wrong doings by freeholders.

Proof other than verbal? I was considering a signed 'one-liner'...
But realistically it must be for the freeholder to prove notices sent as otherwise tenants could just throw away any letter that proved otherwise.

There must be £millions of assets that are blighted by injustice...

[B]If someone could P-mail me (if it's proprietry information) of the kind of commissions AXA offers landlords I'd be eternally grateful :o)

[allewitor]

Can anybody tell me if there are any time limits on serving a Section 17 notice in response to a Section 12b Notice. If the number of flats has changed resulting in the QT being only 50% of the total.

[jeffrey]

Can anybody tell me if there are any time limits on serving a Section 17 notice in response to a Section 12b Notice. If the number of flats has changed resulting in the QT being only 50% of the total.

Assuming that you mean the LTA 1987, P can serve s.17 Notice on QTs "if, at any time after a Notice has been served under section...12B..., the premises...cease to be premises to which [s.1-s.20 apply]".
Premises would so cease if s.1(2) no longer holds good, e.g. if QTs' flats no longer exceed half of total number.

[allewitor]

If a flat has been previously interconnected with another adjacent flat in the same Freehold Title in order to create one large apartment, but is then converted back to into two flats without a formal Planning consent, do they both qualify in the count for total number of flats in the Freehold, if applying for the Right to First Refusal.

[jeffrey]

If a flat has been previously interconnected with another adjacent flat in the same Freehold Title in order to create one large apartment, but is then converted back to into two flats without a formal Planning consent, do they both qualify in the count for total number of flats in the Freehold, if applying for the Right to First Refusal.
1. For conveyancing purposes, planning permission is irrelevant.
2. RFR, under LTA 1987, depends on number of flats in the premises. See s.1(2): there must be two or more flats held by qualifying tenants, and the QTs' flats must be more than 50% of total flats in the premises.
3. So, if the total has now risen by one (and unless lessee of both "new" flats holds at least one more, in which case s.3(2) bars him from being a QT at all), the new flats count towards both:
a. the number of QT flats; and
b. the total.

[Scotty3]

Can anyone help me? I recently purchased a freehold reversion comprising 3 flats. The usual s. 5 notices were served and a solicitor replied on behalf of one(?) lessee only saying:-
"Our client X has confirmed to us that he is interested in purchasing this freehold at the price given. He also confirms that the other flat owners are also interested in joining into the purchase although we have as yet not received any instructions from them". This is all that was received.
Having heard nothing further and after the expiry of the 2 month notice period I purchased the freehold. The 3 lessees are now complaining that they accepted the notice and the sale to them should have gone ahead. I contend that the one client expressing an "interest" and the other two expressing "hearsay interest" (without instructing the solicitor) does not amount to sufficient an acceptance under the 1987 Act, that on a point of pure useage of English they fail, but does anyone have any other views?
In addition, I recall having read somewhere that lessees only have a certain amount of time from the date they know of the change in freehold ownership to force / compel a further transfer to them. Does anyone know what any such period is and which section of the 87 Act it appears in?
All thoughts gratefully received.

[jeffrey]

1. Who served the s.5 Notices- V (or V's sols.) or you (or your sols.)?
2. Were the Notices served before exchange of contracts?
3. LTA 1987 refers to "Acceptance Notice" in s.6(3). If lessees did not serve this counter-notice within the protected period, s.7(1) applies. V then has a twelve-month 'free' window within which the f/r can be sold at same (or greater) price and otherwise on the same basis as offered.
4. Neither the lukewarm letter nor the lessees' vague expression of interest is legally valid. You are OK and they can take a hike.

[sgclacy]

As Jeffrey says they have not served a valid notice and therefore they are out of time. It really is as simple as that.

There only remedy for them is to compulsory enfranchise but that the value would be calculated under the 1993 Act and would, I imagine, be a lot higher than the price you paid.

[Scotty3]

Thank you to both of you. The "lukewarm" acceptance (if that) was sent to me within the 2 month period so if it qualifies as an unequivocal acceptance the lessees have the right to buy. However, the wording that was used was so vague (and I believe equivocal) that it cannot be deemed an acceprance within the Act.

[Scotty3]

In a situation where section 5 notices have been served on the lessees in a building who number 2 (2 flats only) and only 1 lessee accepts (therefore is not "more than 50% of the qualifying tenants") can the freeholder sell to whoever he wants (on identical terms) or can the 1 lessee who accepted the notice compel the freehold transfer?

[tenant29]

Better to do a deal with the other flat owner rather than let an outside ground rent freehold company with a rip off managing agent get in .

[Scotty3]

Thank you, I appreciate what you say, but could I sell elsewhere if I wanted to if only 1 lessee has accepted?

[jeffrey]

Thank you, I appreciate what you say, but could I sell elsewhere if I wanted to if only 1 lessee has accepted?

Yes, you could.

[rrick1]

With regards to Savva v Galway-cooper Court of Appeal Judgement, Lord Justice Chadwick gave Savva the right to purchase the freehold at the same purchase price ten years earlier; is there a Limitation period concerning this Judgement?

The block were live was sold in 1994 without the tenants being informed of their rights of first refusal, which was concealed by a purchaser who by profession is aware of the law, he also failed to serve a section 18 notice which would have safe guarded him in the future.

I believe since 1996 Act the limitation period does not begin until the section 3A notice is served which informs of the Tenants rights, the block were I live was sold 14 years ago, does the Limitation Act 1980 effect our right to serve a notice on the purchaser now? If not which notice should be served on the purchaser?

The Limitation Act 1980 states upon deceit a Limitation period does not become into affect until the deceit is known, is this relevant to this case?
Is it better to make an application to court or the LVT to force Lord Justice Chadwick Judgement if theirs no limitation period?

Link to Judgement http://www.bailii.org/cgibin/markup.cgi?doc=/ew/cases/EWCA/Civ/2005/1068.html&query=SAVVA&method=all

Thank you Kind Regards
Rrick1

[tenant29]

The "Right of first refusal" information is given in a government printed publication which can be downloaded from www.lease-advice.org . I recommend that you study the section on page12 called "Right to Compel Resale " and the Section 12B Notice which is the notice to be served by the majority of tenants.

It says this matter is not within the jurisdiction of the LVT and must be determined by the Court

The Right of First Refusal ( RFR) is provided by Part1 of the Landlord &tenant Act 1987 as amended by the Housing Act 1996. I do not think the limitations Act 1980 applies to leasehold property contracts which are come under the Landlord and Tenant Act .

[drandika]

We have just been served an offer notice under section 5a.

Ironically, I had actually been investigating collective enfranchisement the previous week so I am interested in proceeding.

There are 3 flats. A (ours) and B are lived in by the leaseholders. C is also residential but the lease is owned by a property company. The freeholder owns a large number of properties in the area and recently sold over 100 properties (including flat C) to this property company for a considerable sum of money.

The offer is for £29K. I believe this to be just below market value.

Assuming a market value of £30k, I believe the split would be roughly 6k:12k:12k between A, B and C. This is largely because our lease has a far longer unexpired term.

Additionally, the offer notice we recieved has the wrong postcode. It also has the wrong street number for flat B (so I doubt they have recieved it).

I guess my questions are:
1. Is the notice valid in its current state and shall I get them to reissue it?
2. Is the leaseholder of C (the property company) a qualifying tenant?
3. Should the relationship between the freeholder and the leaseholder of C bother me? For example, are they going to refuse, and then buy the whole freehold on the open market? Can they do this?
4. What is the best way to determine everyones respective share. Is it to get an independent valuation (or my valuation) and pro rate it down to £29K? Should I ask the freeholder how they derived £29K?
5. I am doubtful the leasholder of B will be able to afford their share; we would only be able to afford our share. What options do we have available to us if this is the case?
6. Is there any chance we will be able to negotiate the price down?
7. Any other comments/ advice of what approach to take?

Many thanks in advance.

[jeffrey]

2. Flat C's leaseholder (the property company) can qualify, just as an owner-occupier would. There is now no owner-occupation requirement.
5. Could B not borrow the money (e.g. by further advance on existing mortgage, seruced against leasehold)?
6. No, because the offer from L is the firgure at which L would be able to sell to an outside investor OI- the Notice under s.5A simply gives the collective leaseholders an opportunity to match OI's offer. If they don't, OI can proceed to buy.

[TomMerralls]

Hi.

1. Probably not valid, but if you and at least one other leaseholder wishes to accept Notice, I see no reason why you cannot simply formally accept the notice as it stands.

2. Yes, it is very likely leaseholder C is a qualifying tenant.

3. C cannot buy on their own if you have gone through the correct procedure of "Acceptance" and "Nomination".

4. Yes, to any of your suggestions. There's no harm asking the freeholder for their valuation report and it is then down to the participants to decide whether they accept the freeholder's valuation breakdown.

5. In your situation, if it was merely you interested in buying the freehold, you only have one option and that is to hope the freeholder will sell to you alone after the 2-month acceptance period has passed. The freeholder is free to sell to whom ever it wishes, provided it is not at a lower price.

6. You are always free to attempt negotiations, but the freeholder can simply say "no". If you collectively enfranchise, the ultimate recourse is for the LVT to determine the purchase price, but normally the freeholder will negotiate. "You don't ask, you don't get"!

7. If I were in your position, I would seek to establish very quickly whether one or both the other flat owners are interested. You only have the minimum 2-month period (check your s.5A Notice for the exact date) in which to formally "accept" the notice. If you choose to attempt negotiations, remember the freeholder (if you can successfully negotiate) will have to then re-serve the s.5A notices again, this time at a lower purchase price. If one or both the other leaseholders are not interested, find out if the freeholder is willing to sell to you alone. If this is the case, you can still go through the conveyancing process now, but completion cannot take place until the expiry of the minimum 2-month period.

I hope this helps!

Tom

[jeffrey]

6. You are always free to attempt negotiations, but the freeholder can simply say "no". If you collectively enfranchise, the ultimate recourse is for the LVT to determine the purchase price, but normally the freeholder will negotiate. "You don't ask, you don't get"!

Surely LVT is not involved under s.5 of LTA 1987- this is a right to intercept only, at same price that OI has already offered!

[TomMerralls]

You're right about the right to intercept only, but this still does not prevent a leaseholder from attempting to negotiate. If a cheaper deal can be negotiated, the freeholder will simply need to serve further s.5 Notices at the reduced price.

[jeffrey]

You're right about the right to intercept only, but this still does not prevent a leaseholder from attempting to negotiate. If a cheaper deal can be negotiated, the freeholder will simply need to serve further s.5 Notices at the reduced price.
So why negotiate with leaseholders if you've already got an offer from OI? Let them match it or drop out.

[TomMerralls]

Correct me if I'm wrong Jeffrey, but the person who I was replying to at the beginning of this thread IS the leaseholder??? It is therefore in the LEASEHOLDER'S interests to negotiate down.

[jeffrey]

Correct me if I'm wrong Jeffrey, but the person who I was replying to at the beginning of this thread IS the leaseholder??? It is therefore in the LEASEHOLDER'S interests to negotiate down.
Yes- OP is leaseholder and of course it's in his interests to negotiate down. I was not arguing otherly.
BUT
The current freehold reversioner F need not negotiate at all. He has OI ready to buy. F offers it to leaseholders at the same price: they can take it or leave it. What's there to negotiate?

My last post meant, "So why should F negotiate with leaseholders if F's already got an offer from OI? Let them match it or drop out."

[TomMerralls]

Jeffrey, many thanks for the post. It is not necessarily the position that the freehold has an OI to sell to. I have acted for many freeholders who simply want to rid themselves of the freehold title but have no-one interested in buying it. The FH would rather not sell at auction, so they simply test the water by putting a figure into a s.5 Notice hoping the leaseholders accept at that price. Hence, my suggestion that negotiations are still a possibility.

Of course, the FH may well have an OI interested, in which case I agree negotiations may not come to anything. But, if you don't buy a ticket, you won't win.

[Mark Hessel]

drandika

I would be surprised (to put it mildly) if your freeholder is faking having a purchaser ready to buy, it would be a risky strategy because L cannot sell or offer the interest to another party on different terms or at a lower price than that originally offered within 12 months of his notice, unless he again offers the Right to the existing tenants on the new terms and/or at the lower figure. In other words if he is calling your bluff and you didn't bite he has no buyer and can't do anything in next 12 months and then you are aware of his bluff.

There is also a back up provision, one that catches a lot of people out and is often overlooked.

Section 3A of the Landlord and Tenant Act 1985 (a S3A notice), advising each tenant of their rights under the 1987 Act (i.e. the earlier disposal by your old outgoing L) must also be later served. The S3A notice must be served by the new L, irrespective of whether the original L had or had not served an offer notice on the qualifying tenants prior to the disposal (the section 5)

The S3A notice must state:

that the disposal to the new landlord was one to which Part 1 of the Landlord and Tenant Act 1987 applied

that the tenant (together with the other qualifying tenants) has the right: to obtain information about the disposal; and to acquire the new landlord's interest in the building;

the time limits in which these rights may be exercised.


The purpose if the S3A notice is to ensure that all qualifying tenants are alerted to the possibility of a breach of their rights and are armed with the necessary information to take action. The time limits for remedial action date from the tenants receipt of the S3A notice, irrespective of the date the actual disposal took place.


I had an extremely complex piece of litigation within the last 18 months for an L who acquired the freehold in prime London, W1 area. This was 18 commercial units with 40 flats above, freehold and head lease acquired for £8 million in 1998 (with freehold apparently at £175,000). No 3A notice served (putting side arguments over validity of section 5 notice). 8 years later and after having spent circa £3 million on refurbishment the T's serve a notice seeking information and were asking for the 3A notice details.

There were arguments over various letters and interpretation of whether that was enough to be a 3A notice, the original contract put the price at £175,000 (which would mean the price they would pay), the legal costs were enormous. Two successive QC's (ones the client had used in the past and insisted upon) both were wrong on this and both disagreed with me over severity and effect of failure to serve 3A. However, leaseholders used Antony Radevsky of Falcon Chambers (not QC but writes leading texts on the area). At a without prejudice meeting he was saying almost verbatim what I had been saying, with the result the client sacked the QC (straight after the meeting ground to a halt) and finally allowed me to get someone on board who I knew would do a good job.

The point of the story above may be unclear. It is that even if your current L is trying it on to put you off it won’t work because they have to sell at the price posed. Further if they do then sell the new L has to give you a second bite of the cherry.

It is (as most property law is) technical, complicated and easily made a mess of. Technically as it is a 5a notice then L may negotiate, he would not then have to serve new notices at all though as L would be negotiating with you as nominated purchaser after you serve your notice intending to acquire. I have never seen an L negotiate in these scenarios though, as Jeffrey rightly points out it is not referable to an LVT, it is just what L says they will sell to you for.


For good free information I can do no better than recommend you go to http://www.lease-advice.org/newintro.htm and read the information there, click on “lease advice publications” on the left of the screen and then scroll down and click on “right of first refusal”.

[animal]

If the tenants take up the right to purchase, does the new landlord (tenant owned company) still have to issue the s3 notice?

[jeffrey]

If the tenants take up the right to purchase, does the new landlord (tenant owned company) still have to issue the s3 notice?
Yes (under s.3 of LTA 1985/s.48 of LTA 1987) but, of course, not under s.3A of LTA 1985.

[drandika]

Thanks everyone for there advice/comments.

As an update to this:

I have spoken to a (fairly objectionable) man at the property company (leaseholder of flat C) who categorically said they weren't interested. On enquiry as to why, he said that it is their policy not share investments with anyone, which I can accept. This has however fuelled my conspiracy theory that they are the buyer that the freeholder has lined up.

I also spoke to the freeholders lawyers to get them to correct the errors and try to obtain their valuation schedule. They pleaded ignorance and said there wasn't one and there was no breakdown between flats.

The leasholder to flat B is not around at the moment so I have not had a chance to speak to him yet.

As I see it, I think the price is fair and this is basically the best opportunity we are ever going to get to purchase the freehold.

It is obviously contingent on flat B agreeing so I need to speak to them first. Flat B may well be interested, particular as their lease is now 76 years, and they would need to extend it at some point in the near future if they want to sell.

The sticking point is that we would need to purchase flat C's share (either us alone or split with B). Obtaining our share of the freehold was probably always more about control than investment.

Now, I have to weigh up whether spending 12k on C's freehold is a worthwhile investment and if we did whether it is something that would be worth hanging on to when we move.

[jeffrey]

On your final point: probably yes. At some stage, C or successor will need to extend his lease (thereby freeing-up the part of your purchase price that effectively represents C's f/r value- which will inexorably increase as the unexpired leasehold term declines).

[Littlechester]

Hi,

I live in a masionette, and have owned the flat since March 2002 (leasehold).

There are 6 flats in the block (converted).. they were all privatley owned besides 3, up until recently. There are 2 shops at the front of the property, the man who owns one of the shops has been slowly buying up all the flats, as the current freeholder was due to retire.. I believe he has now bought most of the flats in the block now (besides mine).

He told me in passing conversation the other day that he now owns the freehold, and has done for some time (nearly a yr!)...

I only have 66 1/2 years left on my lease, and am wanting to sell the flat, but unable to due to the short lease.

I have been told that he has bought the freehold for all flats/shops illegally? Is this true? As far as I am aware, its only my flat and one other which he doesn't own.. so, he owns 4 out of 6 flats, and 1 out of 2 shops, and has the freehold to ALL flats and shops.

He has backed me into a corner a little bit, as for about a yr I have been talking about moving, and he always said to me never to put it on the market, as he would buy it from me privately.. then he bought up the freehold, and the other flats, he kept asking, when are you moving, when are you moving, don't put it on the market, I will buy etc etc etc.. but whenever we talked prices, he just said, give me a few weeks, then said, don't put it on the market, give me a few weeks, etc etc, and this dragged on for a long time...and now I WANT to sell ASAP, he has turned round and said he can't buy it now, as its too expensive? but he made a point of telling me he wanted the WHOLE block a while back, which near enough he now has.. now he turns round and say 'oh you won't be able to sell it now, not with such a short lease'.. and then said he would buy it for 30k under the market value...

Has he bought this freehold illegally? as I wasn't given 1st refusal? I feel as if I have been backed into a corner? and not sure what to do?

Many thanks

[jeffrey]

Without knowing a lot more about the f/r transaction, one cannot say. It would demand quite a lot of research re:
a. the circumstances;
b. the effect of this guy already ownong several flats; and
c. the fact that the ground floor is shops.

Either way, you still have legal right to extend lease no matter who owns f/r- so you have not really lost anything.

[Poppy]

Try looking at this from a practical point of view.

Someone sold the freehold without giving you the right of first refusal. Yes the selling freeholder may have contravened the law. But ask yourself:

did you intend to buy the freehold and/or
do you want to take legal action to force the current (innocent) freeholder to sell to you and other qualifying lessees or
have you decided to move anyway and have no particular interest in this building?

You want to sell the flat. You are free to sell to whomever you please.

You want to extend the lease. You have the right to add 90 years to your lease term under the 1993 Leasehold Reform Act.

You are not backed into a corner. There are plenty of options open to you. Just think about them.

[Littlechester]

Without knowing a lot more about the f/r transaction, one cannot say. It would demand quite a lot of research re:
a. the circumstances;
b. the effect of this guy already ownong several flats; and
c. the fact that the ground floor is shops.

Either way, you still have legal right to extend lease no matter who owns f/r- so you have not really lost anything.


Thanks Jeffery..

A) The freeholder sold the freehold to a third party (who owned one shop) They were very good friends.
B) ?
C) The groundfloor is made up of 2 shops and 2 flats (I am in a ground floor flat behind one of the shops

I am aware I have a legal right to extend the lease... I have 'lost' the offer to buy the freehold.. and during the period of him saying 'don't put it on the market, don't put it on the marker, I will buy it I will buy it' the market value has now gone down, and now he has 'changed' his mind and says he will only buy it for 30k under the market value.

So, has the freeholder broken the law by not offering me first refusal?

[Littlechester]

Try looking at this from a practical point of view.

Someone sold the freehold without giving you the right of first refusal. Yes the selling freeholder may have contravened the law. But ask yourself:

did you intend to buy the freehold and/or
do you want to take legal action to force the current (innocent) freeholder to sell to you and other qualifying lessees or
have you decided to move anyway and have no particular interest in this building?

You want to sell the flat. You are free to sell to whomever you please.

You want to extend the lease. You have the right to add 90 years to your lease term under the 1993 Leasehold Reform Act.

You are not backed into a corner. There are plenty of options open to you. Just think about them.

Hi Poppy, thank you very much for your reply.

I have no particular interest in the property, other than as an investment, which was due to pay out upon its sale (bought run down, did up, now want to sell for a profit).

Yes, I can extend the lease, but judging by the way this guy deals with things, I would expect him to play hard ball, and request a large amount for the extension, which I would end up out of pocket with solicitors fees etc in getting it valued etc.

Yes I want to sell the flat, and yes I am aware I can sell to whoever I like, HOWEVER, I am now not in a position to sell due to the short lease.. so, I know I have to exend the lease prior to sale, BUT, my point I am not doing a very good job at making is.. IF this sale went through illegally, do I have a bartering tool with the freeholder with regards to either extension (cheap)

I beleive he knows 100% that I was not offered first refusal.. him and the previous freeholder are VERY good friends...

I am aware that this site is prodomanantly made up of people from the 'other' side, but I would appreciate your help none the less. I am not trying to be awkward, I am just trying to lower my costs (lease extension/sale etc) as I feel this has been very underhand (illegal?!) and therefore want to use the situation to my advantage (obviously)

[jeffrey]

You must not buy only your flat's f/r: NEVER EVER SEVER, because it causes immense 'covenant' problems.

[Littlechester]

You must not buy only your flat's f/r: NEVER EVER SEVER, because it causes immense 'covenant' problems.


Gosh, things get more complicated. What are covenant problems?

[jeffrey]

Gosh, things get more complicated. What are covenant problems?
Example:

A owns flat 1.
B owns flat 2.
A is lessee of flat 1 (and B is lessee of flat 2).
C owns f/r to both, the whole building.
A has a contract with C (and B has contract with C), i.e. lease.
A has no contract with B.
If B breaches covenant in flat 2, A as lessee of flat 1 cannot take action directly.
A cannot easily enforce covenants against B, nor vice-versa. Only C can, as lessor of both.
So neither A nor B should acquire a single flat's f/r.

[Littlechester]

Thanks Jeffery, so do you think the best thing I should do is just to extend the lease, and use the illegal sale of the freehold as a levering tool to get it at a low price?

[jeffrey]

Thanks JeffREy, so do you think the best thing I should do is just to extend the lease, and use the illegal sale of the freehold as a levering tool to get it at a low price?
Yes, extend lease asap- the cost would rise as the unexpired term declines. As you know, a 66yr. lease is almost unsaleable/unmortgageable.

[Littlechester]

Thanks Jeffery!

What do you think the best way to go about it would be? A letter? In person?

Would it be a good or a bad idea to advise I 'know' the sale of the freehold was done illegally? Or wait until he gives me a 'first' proposal price for the extension?

I very much appreciate your help.

Suzy

[jeffrey]

Thanks JeffREy!

What do you think the best way to go about it would be? A letter? In person?

Would it be a good or a bad idea to advise I 'know' the sale of the freehold was done illegally? Or wait until he gives me a 'first' proposal price for the extension?

I very much appreciate your help.

Suzy
First, serve your s.42 Notice (in which you have to propose a premium [purchase price for new lease]). Once your extension right is accepted, you negotiate on price- then, perhaps, throw the RFR [Right of First Refusal] omission into the ring and see what happens.

[Keith Horgan]

My daughter received a letter from her new landlord advising they had taken over the freehold of her flat. This was the first she new of any change in owner of the freehold. Whilst I understand the Right of First Refusal, which appears not to have been done by the outgoing landlord, I have also read that she only has 4 months (which I believe has now expired), from the arrival of the letter from the new freeholder, to complain that she was not given an opportunity to purchase the freehold herself. I appreciate there are rules that only 90% of tenants need to be informed of the sale but her flat is one in a block of four, purpose built in 1967. She has lived in the flat for around 4-5 years and there is no condition we are aware of that precludes the previous landlord from being required to offer the freehold to her and the other tenants (i.e they were not a charity, local authority, didn't sell to a family member or subsidiary company, etc.) If it's of use, her original 99 year lease (granted on 23rd June 1967) was extended in 2000 (by the previous tenant) to have a term of 125 years (from 23rd June 1967) so there is 82.5 years remaining. She is looking at a Section 42 Notice under the 1993 Act but also wants to know what rights she may have about (a) getting information from the present landlord about how much they bought the freehold for 1-2 years ago and (b)if any rights exist, can she pursue them through the present landlord or must she chase the previous landlord.

FYI Freeholder and Landlord are one and the same, sorry I switch between the two terms.

All advice appreciated.:confused:

[Poppy]

Take a look at the Leasehold Advisory Service (http://www.lease-advice.org/rfrmain.htm) website for information on the subject.

[Keith Horgan]

Yes, That's where I got the idea about the 4 months period to issue the Section 11A notice in response to the Section 3A from the new freeholder.

I was wondering though, if the S.3A didn't comply with the requirements, i.e.


The S3A notice must state:

* that the disposal to the new landlord was one to which Part 1 of the Landlord and Tenant Act 1987 applied

* that the tenant (together with the other qualifying tenants) has the right:
o to obtain information about the disposal; and
o to acquire the new landlord's interest in the building;

* the time limits in which these rights may be exercised.

would that make it invalid?

If invalid, does that mean she might still be able to issue a S.11A?

[jeffrey]

See s.12B(3), below:

12B. Right of qualifying tenants to compel sale, &c. by purchaser.

(1) This section applies where:
(a) the original disposal consisted of entering into a contract and no notice has been served under section 12A (right of qualifying tenants to take benefit of contract), or
(b) the original disposal did not consist of entering into a contract.

(2) The requisite majority of qualifying tenants of the constituent flats may serve a notice (a “purchase notice”) on the purchaser requiring him to dispose of the estate or interest that was the subject-matter of the original disposal, on the terms on which it was made (including those relating to the consideration payable), to a person or persons nominated for the purposes of this section by any such majority of qualifying tenants of those flats.

(3) Any such notice must be served before the end of the period of six months beginning:
(a) if a notice was served on the purchaser under section 11A (right to information as to terms of disposal, &c.), with the date on which the purchaser complied with that notice;
(b) in any other case, with the date by which:
(i) notices under section 3A of the Landlord and Tenant Act 1985 (duty of new landlord to inform tenants of rights) relating to the original disposal, or
(ii) where that section does not apply, documents of any other description indicating that the original disposal has taken place, and alerting the tenants to the existence of their rights under this Part and the time within which any such rights must be exercised,
have been served on the requisite majority of qualifying tenants of the constituent flats...

[Keith Horgan]

Thanks everyone, looks like we've got a case.

No notice = it's never been legally served so the 4 months hasn't started yet.

[jeffrey]

No notice = it's never been legally served so the 4 months hasn't started yet.
...unless, in the Act's words, "documents of any other description indicating that the original disposal has taken place, and alerting the tenants to the existence of their rights under this Part and the time within which any such rights must be exercised, have been served on the requisite majority of qualifying tenants of the constituent flats".

[Keith Horgan]

Thanks Jeffrey. The only document sent was a demand for ground rent. I understand from previous judgements that the matter hinges around two factors. Whether this counts as being 'served' and whether it counts as providing the correct notice of rights. We don't believe a demand for ground rent meets either requirement. Would you agree?

[jeffrey]

Was the demand compliant with s.166 of the 2002 Act?

[quarterday]

you have another good few weeks to bang in a purchase notice entitling you to acquire the freehold on the same terms as the new freeholder. It is not legally binding, if in the end the money cannot be raised.

[mo999]

Hi all,

I hope someone can help me. I am loking to serva notice on my leaseholders as I am looking to sell the freehold which I own. I am looking to sell in auction. I have read the rules and have the prescribed section 5b form. I can't see anywhere where it talks about the amount. It may be obvious as we don't know the amount yet as it will be in auction but do I not need to inform them of the reserve price or does this come later.

Any help on this will be most appreciated.

Thank you.

[jeffrey]

1. That Notice does not state an amount.
2. Before the auction, L serves it on the lessees.
3. The lessees can then serve L under s.8B(2), electing to apply the s.8B procedure.
4. If they do, and if the auction yields a successful bidder, then L- after the auction- serves them under s.8B(3) with a copy of the auction contract.
5. They can thereafter 'adopt' it and use RFR.

[GeeBee]

I am in the process of completion on a lease extension under the Act and it has come to my attention that there has been a part change in ownership of the F/H in January this year.

As a result, I really could do with understanding the implications of this prior to completion. Can anyone help please?

The property is a flat in a converted house, three flats, all leased, the Landlord(s) is/are the same people that own the leases to Flats 1 and 2. I own Flat 3.

It appears that Landlords C/D have replaced Landlords B/C as the second and third parties to the Freehold. Landlords C/D are the new lessees of Flat 1 which was sold to them in June last year by Landlords B/C.

Landlords C/D acquired Landlords B/C share of the F/H in January this year. I was not served notice, which I understand is allowed under LTA 1987 as amended under the "all but one if less then 10 tenants rule".

I was required to sell the F/H to Landlords A/B/C as part of a Collective Enfranchisement claim in November/December 2008.

Until then, Flat 2 was let on an AST. Afterwards, I cannot recall precisely when, Landlord A appears to have "moved in" to Flat 2. A related question here is what constitutes/defines a "resident landlord".

Now, it is my understanding that if a freehold, or a share of a freehold, is offered for sale informally outside the terms of LTA 1987, all qualifying lessees have a Right of First Refusal.

I have not been offered any opportunity to buy back a share of the freehold. I was not formally informed by service of any notice of a change in landlord. This is the first time that I have been made aware of any change in ownership.

Whilst there may not have been a breach of the requirements of LTA 1987 in terms of the serving of notice, do all qualifying tenants still have rights of remedy; that is can they demand information on the sale and the price paid, and can force the Landlords to sell a share to them at that price.

If I have any right to force the sale of a share of the F/H to me, that would be far better and of more value than simply extending the lease under the Act.

Any comments would be greatly appreciated.

[jeffrey]

This is too technical a question to yield a meaningful answer on a public forum. You need technical advice from an expert solicitor.

[Richard Webster]

I couldn't follow all the detail here but one point is clear.

A freehold is a single entity, so to claim the right of first refusal a majority of the qualifying lessees have to claim under RFR so OP would have to get others to join with him in the claim - it is not a case of claiming a right to a "share" on your own.

[sgclacy]

I am in the process of completion on a lease extension under the Act and it has come to my attention that there has been a part change in ownership of the F/H in January this year.

As a result, I really could do with understanding the implications of this prior to completion. Can anyone help please?

The property is a flat in a converted house, three flats, all leased, the Landlord(s) is/are the same people that own the leases to Flats 1 and 2. I own Flat 3.

It appears that Landlords C/D have replaced Landlords B/C as the second and third parties to the Freehold. Landlords C/D are the new lessees of Flat 1 which was sold to them in June last year by Landlords B/C.

Landlords C/D acquired Landlords B/C share of the F/H in January this year. I was not served notice, which I understand is allowed under LTA 1987 as amended under the "all but one if less then 10 tenants rule".

I was required to sell the F/H to Landlords A/B/C as part of a Collective Enfranchisement claim in November/December 2008.

Until then, Flat 2 was let on an AST. Afterwards, I cannot recall precisely when, Landlord A appears to have "moved in" to Flat 2. A related question here is what constitutes/defines a "resident landlord".

Now, it is my understanding that if a freehold, or a share of a freehold, is offered for sale informally outside the terms of LTA 1987, all qualifying lessees have a Right of First Refusal.

I have not been offered any opportunity to buy back a share of the freehold. I was not formally informed by service of any notice of a change in landlord. This is the first time that I have been made aware of any change in ownership.

Whilst there may not have been a breach of the requirements of LTA 1987 in terms of the serving of notice, do all qualifying tenants still have rights of remedy; that is can they demand information on the sale and the price paid, and can force the Landlords to sell a share to them at that price.

If I have any right to force the sale of a share of the F/H to me, that would be far better and of more value than simply extending the lease under the Act.

Any comments would be greatly appreciated.

Your post is very difficult to read as you refer to three flats and landlords A/B/C & D, however ssuming the following is a correct summary :-

There are three flats. two of the flats are controlled by the same person or persons acting in concert. In which case they do not need to issue Section 5 notice on a disposal as you can never be more than 50%. You will be 33.33%

[GeeBee]

Thank you all for your comments.

Explained another way, the tenants of Flats 1 and 2 (3 persons) acquired the freehold from the landlord/tenant of Flat 3 in January 2009 as part of a collective enfranchisement.

In June 2009, the lessees of Flat 1 (2 persons) sold their leasehold interest.

In January 2010, the freeholder (lessee of Flat 2 and the former lessees of Flat 1) then sold a 50% share in the freehold to the new lessees of Flat 1 (2 persons), without offering the opportunity to acquire a share to the lessee of Flat 3.

At that time, i.e. January 2010, I believe that all three lessees were qualifying tenants for the purposes of RFR, though I may be wrong. Certainly, I believe that the lessees of Flats 1 and 3 were.

If this disposal was permitted under the rules, then fine. I just wanted to be sure that some procedural mechanism has not been used in effect to not offer the lessee of Flat 3 the same opportunity as the new lessees of Flat 1 to acquire a share in the freehold.

[GeeBee]

Your post is very difficult to read as you refer to three flats and landlords A/B/C & D, however ssuming the following is a correct summary :-

There are three flats. two of the flats are controlled by the same person or persons acting in concert. In which case they do not need to issue Section 5 notice on a disposal as you can never be more than 50%. You will be 33.33%

Thanks sgclacy,

Yes, that would have been the case prior to the disposal of the lease by owners of Flat 1 in June 2009. After that, up until January 2010, the new lessees of Flat 1 and the lessee of Flat 3 constituted >50%.

Or am I missing something?

[Moderator1]

Several largely similar questions on separate threads have been merged into this thread (hence the repetitive nature of answers).

[informer22]

I know this is an old posting. But we are investigating P. Brotherton. Maxiwood, Investsave Ltd, Hove ,Gougharce, Phillip Brotherton do you know if David Stockman of Howlett Clarke solicitors is involved?. Criminal matters concerning
Phillip Brotherton from fraud to criminal deception money laundering.
Have been placed before the Chief Constable of Sussex Police.