Right of First Refusal - major issue. Please help!

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    Right of First Refusal - major issue. Please help!


    I bought a flat in 2017 with 33% share of freehold. I was told by the solicitors at the time that the freehold was registered to my flat (Flat 1). There are three flats in the property. It is a converted town house. The other 66% is owned by another individual. We are tenants in common on the land registry. This individual lets out one flat (Flat 2) and sold the leasehold of their third share (Flat 3). The other freeholder therefore does not live in the property. The leaseholder for Flat 3 has paid ground rent to the other freeholder (never to me) and had to seek permission from the other freeholder to make structural changes to Flat 3. I have lived in the property for two years and it is my sole residency.

    I am now selling my flat as leasehold with 33% share of freehold and the buyer’s solicitor is saying RFR needs to be given to the leaseholders. The leaseholder of flat 3 has said informally they do want a share of freehold. The other freeholder has said they will sell one third of their freehold to this leaseholder as a solution, for a fair sum. However the buyer's solicitor is insisting section 5a notice is served in addition to the above solution. They are saying the leaseholders should be offered it for the same amount I'm selling it for (£1). Given the leaseholder of Flat 3 wants a share, they are more likely to go for it for £1 than the higher sum. It effectively means I bought the leasehold of a flat with a share of freehold and now can’t sell a flat with that freehold, which is a less attractive sale. I don’t believe RFR was drawn up for individuals like myself. It has delayed this process by a month. My original solicitors recommended we find a new solicitor with specialist knowledge and did not charge us for any of the work done. Our current solicitor does not believe RFR applies but cannot persuade the buyer's solicitor. Both our vendors and my fiance and I are living out of boxes as RFR was raised two days before agreed date of exchange. My fiance and I are now close to losing our joint purchase of a family home as our vendors are losing faith in how sellable my flat is.

    Can anyone advise? I said I will put the flat back on the market as leasehold only at which point the buyer agreed to the solution of the other freeholder selling part of their share. Buyer then went back on this, stating they are concerned of the risk with the other leaseholders having a right to the freehold the buyer buys from me.

    Does RFR even apply? If only one leaseholder wants it, so less than 50% of qualifying tenants, can RFR even proceed? Am I not an exempt landlord despite the co-freeholder not being exempt? Is there another solution to sell my flat? I feel stuck in my property having been sold something with the understanding that the freehold I bought was registered to the flat I bought. RFR was never raised before and there have been two other opportunities for this leaseholder to be served notice to buy a share of freehold.

    Thank you for reading. I am grateful for your advice.

    #2
    I suggest you find a buyer with a less stupid solicitor. (I'm not sure why he would want his client not to own a share of the freehold.)

    Comment


      #3
      I assume you own the freehold as tenants in common. If so, unless there is a trust deed to the contrary, the co-owner cannot give permissions without your agreement, and you should be receiving your share of the ground rent (which you should declared for tax).

      Comment


        #4
        1. There is free guide to RFR which can be downloaded from LEASE ( www.lease-advice.org .)

        2. Your one third share in the freehold title is proportionate to one flat in a block of 3 flats .

        3. I would expect transfer of 1/3 share of freehold title with the sale of leasehold flat would not require you to offer RFR .

        But you can send an enquiry to the Legal Advisor at LEASE asking about this situation.

        Comment


          #5
          Originally posted by Gordon999 View Post
          1. There is free guide to RFR which can be downloaded from LEASE ( www.lease-advice.org .)

          2. Your one third share in the freehold title is proportionate to one flat in a block of 3 flats .

          3. I would expect transfer of 1/3 share of freehold title with the sale of leasehold flat would not require you to offer RFR .

          But you can send an enquiry to the Legal Advisor at LEASE asking about this situation.
          Hi there,

          Thanks, yes I did speak to someone twice from LEASE and fully explained the situation. They said that they believe I'm exempt and RFR does not apply, but they only offer advice and cannot provide a "definitive statement." Their response was forwarded to the buyer's solicitor and the buyer's solicitor said they would only accept an authority, such as the court, settling the matter.

          Comment


            #6
            Originally posted by leaseholder64 View Post
            I assume you own the freehold as tenants in common. If so, unless there is a trust deed to the contrary, the co-owner cannot give permissions without your agreement, and you should be receiving your share of the ground rent (which you should declared for tax).
            Yes we do own as tenants in common and have a declaration of trust staying that I own one third of freehold for the my flat, as titled on this document.
            What do you mean "give permissions"?

            Comment


              #7
              You said that one leaseholder requested permission for structural changes from one of the freeholders. That permission isn't valid, it must be given by all the joint freeholders, unless there is something in the trust deed t the contrary.

              Apart the RFR issue, I think the buyer should be concerned that some of the joint freeholders are abusing their powers by taking rent that is owed to you and by granting consents without your agreement.

              Comment


                #8
                I might have some ideas on this but please clarify

                I am correct in thinking you own 1/3 of the freehold and one other 2/3

                what is the term remaining on the lease the ground tent and approx value of the flats

                Comment


                  #9
                  Originally posted by sgclacy View Post
                  I might have some ideas on this but please clarify

                  I am correct in thinking you own 1/3 of the freehold and one other 2/3

                  what is the term remaining on the lease the ground tent and approx value of the flats
                  Yes that is correct.

                  My lease = 89 years, other flats differ. Flat 3, for instance, is in the region of 60 years.

                  Approx value of flats range from £140k - £200k.

                  Comment


                    #10
                    Lets call you A and your co freeholder (and the lessee of Flat 2) B and the lessee of Flat 3 we call C and the purchaser of your flat D

                    Firstly let us consider Section 5 of the Landlord and Tenant Act 1987


                    A landlord who has not served an offer notice on all of the qualifying tenants on whom it was required to be served shall nevertheless be treated as having complied with this section—

                    (a)if he has served an offer notice on not less than 90% of the qualifying tenants on whom such a notice was required to be served, or

                    (b)where the qualifying tenants on whom it was required to be served number less than ten, if he has served such a notice on all but one of them.]




                    Therefore you serve the Section 5 Notice on A and B but not on C

                    A & B elect not to take up their collective rights to purchase as A & B together and therefore A & B can sell to whoever immediatley after they have waivered their rights

                    It is validly served as it meets the requirements of subsection (b) above

                    Therefore the transfer will be from A & B to B & D



                    Comment


                      #11
                      Originally posted by sgclacy View Post
                      Lets call you A and your co freeholder (and the lessee of Flat 2) B and the lessee of Flat 3 we call C and the purchaser of your flat D

                      Firstly let us consider Section 5 of the Landlord and Tenant Act 1987


                      A landlord who has not served an offer notice on all of the qualifying tenants on whom it was required to be served shall nevertheless be treated as having complied with this section—

                      (a)if he has served an offer notice on not less than 90% of the qualifying tenants on whom such a notice was required to be served, or

                      (b)where the qualifying tenants on whom it was required to be served number less than ten, if he has served such a notice on all but one of them.]




                      Therefore you serve the Section 5 Notice on A and B but not on C

                      A & B elect not to take up their collective rights to purchase as A & B together and therefore A & B can sell to whoever immediatley after they have waivered their rights

                      It is validly served as it meets the requirements of subsection (b) above

                      Therefore the transfer will be from A & B to B & D


                      Thank you. I did present this option too actually, to the original solicitors, but it wasn't taken up. I believe notice cannot be served to myself? But perhaps the new solicitor would take a different view.

                      Comment


                        #12
                        I don’t think that is correct - but if it is then it would also apply to your co owner . Therefore only one person is eligible to receive the notice In this case C and as noted above one lessee where there are less than 10 can be excluded

                        Comment


                          #13
                          Jane ,

                          The free guide to RFR which can be downloaded from : www.lease-advice.org

                          Section 2.2 shows :

                          The RFR does not apply to the following landlords:
                          • most housing authorities (local Councils, New Towns and Development Corporations);
                          • registered social landlords and fully mutual housing associations which are not registered;
                          • charitable housing trusts; and resident landlords who live in the building where the following two conditions apply:
                            • the building is not a purpose-built block of flats, that is, it must be a property, a house for example, which has been converted into flats since its original construction; and
                            • the landlord genuinely lives in the building as his only or principal residence and has done so for more than 12 months.

                          RFR does not apply to resident landlord / flat owner living in the building which was a house converted to flats.

                          Comment


                            #14
                            That is useful to remember but in this case the joint freeholder does not live at the property

                            In any transfer of property ie where A & B own a property and A wishes to sell to C the transfer will be A & B to B & C . Further if A wants to sell their interest to B then it would be A & B to B

                            Therefore as B is not a resident landlord the exemption cannot be claimed and is lost for both A & B and Section 5 have to be considered

                            Comment


                              #15
                              I believe if the "joint freeholder" is selling the entire freehold title , the "joint freeholder" would be required to offer RFR. to the leaseholders of the 3 flats .

                              But in this situation , the freehold title has already been split and Jane, as leaseholder is selling one leasehold flat with her one third share in the freehold title to the next leaseholder of the same flat.

                              Its not reasonable for her one third share of the freehold title to be compulsorily offered under RFR to other leaseholders and be subdivided into one nineth share to transfer to leaseholders of other 2 flats. The other 2 leaseholders are have rights to the other 2/3rds share of the freehold title, but that other 2/3rds share in the freehold title is not part of Jane's sale.

                              If some authority is wanted to declare that jane qualifies as " resident landlord living in a building which was a house converted into flats",

                              then I suggest you visit your local Magistrates Court with copy of council tax bill and ask the court manager if the Court can declare Jane is resident landlord .


                              .

                              Comment

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