Can flat's regulated tenant intercept freehold sale?

[martin_n]

I own a property which has a shop on ground floor and a flat upstairs; the flat is rented out to a regulated tenant. A few weeks ago after some silly arguments with my wife I proposed to sell the property (deep down we did not want to do this). After a few days after assigned an agent we had an offer (due to the popular of the location), however, we realised that it was not what we wanted to do so withdrew the property off the market straight away.

By somehow the tenant found out (I think when the agent wrote a letter to us he mistakenly sent to the tenant’s address), the tenant is now asking us to explain why we are selling the property (please note that we are no longer selling it) and may take legal actions against us.

We understand the penalty we may get if selling a property with a regulated tenant without offering it to them first, but I have two questions and hope someone can help:

1) Do I have to explain to the tenant why we did it? Considering that we have not sold it yet and it is off the market anyway.
2) Can he take legal actions against us?

Thanks.

[Editor]

See post below for correction

I think you are worrying unnecessarily here.
The Righ to Buy Scheme applies to public sector tenants, not private sector tenants.
Private landlords are under no obligation to offer their properties to their tenants before putting them on the market.

[martin_n]

Thanks Editor. Assume that I do not have to answer the tenant why I DID put the property on for sale briefly???

Any opinion would be appreciated.

[LMT]

If you think the agent sent a letter to you at the tenant's address what is your tenant doing opening it? Ask to see the letter yourself. The tenant has no right to an explanation if his situation is not going to change, just tell him it was a misunderstanding / mistake / related to a different property and things will carry on as usual.....

[Tax Accountant]

As the Editor has stated, you are free to sell to whoever you like. If you do, the new owner simply buys the property with the tenants.

However, it would be nice just to reply to the tenant and make some excuses. This would help maintain or build the goodwill with the tenants.

Talking doesn't hurt anyone.

Ramnik

[lucid]

As far as I am aware there is such a thing as "the right of first refusal" which in fact does apply to private regulated tenants and long leaseholders, where yes the tenant must be offered the property first. There are severe penalties for not following the rules including fines, and if the property is sold without it being offered to tenant first, they have an automatic right to then purchase it from the new owner at the same price.

But in the situation described here I am not sure it applies. You should get specialist advice because of the mixture of business and resedential in the property.

The rule applies to any property containing 2 or more flats held by qualifying tenants, provided that more than 50% 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 resedential accomodation eg. shops and offices, the qualifying tenants (but not the other tenants eg commercial or business tenants) have the right of 1st refusal, unless more than 50% of the internal floor area (not counting common parts-staircases, landings etc) is in non resedential use.

Confusing, yes! so well worth getting advice to see if it applies to your situation. The rules surrounding this are complex. I think the fines for non compliance are about £5ooo, not 100% sure though.

hope this helps

[martin_n]

Thanks for the advises. I will consult a solicitor on this matter, it is just that we have a very difficult tenant who is looking for us to make mistakes to make a claim or give up the property all together.

I understand that talking is good but this tenant is an exception.

Thanks again.

[Paul_f]

Lucid! I'm fascinated by this right to buy under a Rent Act 1977 (Regulated Tenancy). Will you be good enough to consult your oracle and let us know under which section of which act this can be verified?

[Editor]

It seems that LUCID is absolutley right on this one - I was not aware this applied to regulated tenancies - just shows how Draconian this legislation was and why it virtually destroyed the market for rental housing provision in England and Wales in it's day - of course it still applies to these old tenancies.

See the ODPM web site at:

http://www.odpm.gov.uk/stellent/groups/odpm_housing/documents/page/odpm_house_601818-09.hcsp

This is what it says on the matter:

What happens if the landlord wants to sell the property?

A landlord who wishes to sell a property containing flats must normally give the qualifying tenants the opportunity to buy it. If the landlord fails to comply with the first refusal procedure and sells to a third party, he or she commits a criminal offence and may be fined up to £5000. If the landlord sells his or her interest in this way, the purchaser must inform the tenants of his or her name and address, and serve a notice on them saying that the right of first refusal may apply. The tenants have the right to buy the property at the price the purchaser paid. If the purchaser fails to do either of these, he or she commits a criminal offence and may be fined up to £2500. The time limit for the tenant to exercise his or her right does not start until he or she has been notified by the purchaser.

[lucid]

I believe it's:
The Right of First Refusal-Part1 of the Landlord and Tenant Act 1987 (as amended by the Housing Act 1996)

Information from the booklet Resedential long leaseholders: a guide to your rights and responsibilities.

also covers the Commonhold and Leasehold reform Act 2002

Reference:03HC01756 download:
http://www.odpm.gov.uk/stellent/groups/odpm_housing/documents/page/odpm_house_026618.pdf

or send off for free:

ODPM Publications, PO Box 236, Wetherby, West Yorkshire LS23 7NB
tel 0870 1226 236
email: odpm@twoten.press.net

[Tax Accountant]

To Lucid and the editor:

I have a flat which has 999 years from 1988. Many years ago, the freeholder sold the free hold to a third party and I do not recall receiving any notice of a first refusal. I am now attempting to explore the possibility of buying out the freeholder under the enfranchisement legislation.

Do I have any redress in respect of not receiving any first refusal to buy the freehold?

Any advice would be appreciated.

Ramnik

[lucid]

Firstly I think you should download the booklet (a hefty read!) from the link in the last post. Once you have read it, it may answer your questions. The rules regarding "first refusal" are complex and involve the quantity and type of leases within a particular property as well as the type of landlord/freeholder. It may also be relevent when the property was sold depending on what the legislation was at the time. There are also time limits etc.

If that doesn't help specialist advice may be needed. Reading the leaflet may at least give you an idea as to whether the "1st refusal" rules apply and help you decide whether you wish to take the matter further.

[Paul_f]

Just because I'm able to give advice on many topics doesn't mean to say I can't learn a thing or two from the "zone". Thanks to Lucid & Tom!