Freehold Section 5b - Qualifying Tenants?

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    Freehold Section 5b - Qualifying Tenants?

    Fast forward almost two years from my previous posts whereby I enquired about RTM vs. RMC and taking over the management of a two-block (13 flats total) site with 28 houses (one a freehold), and we've been served a Section 5b for the entire freehold including houses. Total rent £6.5k per annum. We were served a Section 5a in 2015 to purchase the freehold of the flats only.

    As an RMC (limited by guarantee) we successfully and completely overhauled the two apartment blocks and finances from top to bottom. Over the last 18 months, we've also been trying to buy the freehold (flats only) from the mortgagee in possession (builder/original landlord liquidated 2012, company dissolved Nov 2019), who now has a fixed charge over the freehold. They haven't been interested in selling the freehold for the flats only. The Duchy of Lancaster can do nothing because of the fixed charge.

    Last week the flats received a Section 5b with the freehold for the whole site going to auction in May. We are interested in purchasing this but have a few Q's. Nobody owns more than two flats, there is no commercial activity on site, non of the houses own a flat, we satisfy all criteria for RFR.


    - Are the flats the only qualifying tenants or would the houses have received the Section 5b as well and are they also qualifying tenants?

    - Is this Section 5b offering the freehold for the entire site valid knowing that the landlord previously served a Section 5a for the flats freehold ONLY in 2015?

    - The MAN title number is incorrect on the Section 5b as it has one extra digit. Also, the flat ground rents listed are out of date. Is this a problem?

    - Do we have to create another company (this time with shares) to buy the freehold, and do we run the RMC alongside the new company or close the RMC?

    Thanks a lot.

    You should send an enquiry to the legal advisor at LEASE ( ) and put your questions to them. Also you should be aware of the Government's announcement dated 7 Jan 2021 for leasehold reform.

    Owners of Leasehold houses have individual right to buy the freehold title for their house under the 1967 Act

    The owners of leasehold flats , collectively , have legal right to RFR but you need a majority of leaseholders (= 7) to respond to RFR. So you should expect the freehold title for the block of flats to be sold separately from the leasehold houses.

    Is the total ground rent of £6.5K collected from 41 properties ( 13 flats and 28 houses ) ?

    If you can persuade all 41 leaseholders to each contribute £3K per flat (or house ) = £123K raised , you ( i.e RMC) could consider making an offer at £115K - £120K to buy the freehold title for the entire site .



      The houses do not have any rights under Section 5 of the Landlord and Tenant Act 1987 and the notices would just be served on the flat owners. So, the flat owners have to consider the overall investment when making their decision. It may well be an external investor may buy the freehold interest in the houses from you if you wish to raise funds.

      The original 5A notice of 2015 has expired so I do not see this as an issue

      Unless you can show that the title number being incorrect effected your appraisal of the offer, I do not see there are any grounds to challenge the validity of the notice on that point.

      You should buy it in a separate company which has share capital as you may have to consider the distinct possibility that not all flat owners would wish to buy the freehold. You may want to grant overriding leases over the non-participators and see them to an external investor or to a lessee in the block who may wish to invest more money. Alternatively, you may need to raise finance by issuing a debenture. All of these types of scenarios do not work in an RMC company hence the need for a seperate company.


        Thanks for your replies. LEASE booked for Wed.

        The RFR solicitors I've spoken with today are unsure regarding my concerns about the errors in the 5b. The site up for auction on the letterhead is correct but incorrect on the Appointment of Law of Property Act Receivers document. It lists a site 5 miles away from where I am. The solicitor who issued the 5b, is adamant there is no problem and all will be good on auction day.

        Do RTE companies exist with template Memorandum and Articles or do we need to buy a basic company with shares and amend the appropriate documents?



          Discuss your queries in post #1 including "address error" with LEASE.


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