want to sell freehold - do I have to give notice of first refusal?

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    want to sell freehold - do I have to give notice of first refusal?

    Bought a flat in 2006 and acquired the freehold of the building with the purchase. The building is split into 2 flats. We have been letting out our flat since 2008 and have just put it on the market. I made an informal offer to the upstairs leaseholder for a share of the freehold a few weeks ago and she is not in a position to do so at the moment. My offer was at a reduced rate, considering her lease is now at 74 years.

    So we have extended the lease on our flat to 125 years and have spoken to a few investors who are interested in buying the full freehold at a price which is significantly more than the offer I made to the other leaseholder. Obviously this is an attractive prospect to me. I have no interest in maintaining the freehold once I have sold the flat.

    I have consulted 2 solicitors about whether I need to give an official notice of first refusal to the other leaseholder before selling the freehold to a 3rd party and I am getting conflicting advice about whether it is necessary considering we have 50% interest in the property. I want this freehold situation sorted before I sell my flat so would have to wait for another 2 months before we could exchange contracts.

    So I please ask for your opinions on whether you think I have to serve notice and wait or whether I am safe to sell to a 3rd party now.

    #2
    Technically you do have to offer the right of first refusal and serve notice to the other leaseholder before selling to a third party, BUT as there are only 2 flats the other leaseholder cannot exercise their right and accept the offer as they need a majority of more than 50% leaseholders.
    So you should be safe to sell the freehold but serving the notice would remove any doubt.

    Comment


      #3
      Thanks for your response.

      My issue is time. I know that in an ideal world I would serve notice then sell to a 3rd party after 2 months. However I don't want to have to wait 2 months for a response from the leaseholder then a possible month after that organising the sale of the freehold to a 3rd party. Would the leaseholder have any grounds to sue me if I don't offer the right of first refusal to her first? It just seems like a formality to go down this route and is illogical in this case.

      Comment


        #4
        In order to challenge the sale they would need more than 50% of the qualifying leaseholders to take action, so when there is only 2, it is not possible.
        The buyers solicitor may want to confirm the notice was served though.

        Comment


          #5
          Thanks again.

          Do you know which section of the RFR legislation states that 50% of leaseholders need to take action? I'm surprised that my solicitors haven't picked this up although neither have dealt with a case like this before.

          Comment


            #6
            The lease site hjas some good info > http://www.lease-advice.org/publicat...nt.asp?item=16 it is a criminal offence not to comply so its not worth skipping, if you lived there then it would appear that you could indeed skip the process.

            Andy
            Advice given is based on my experience representing myself as a leaseholder both in the County Court and at Leasehold Valuation Tribunals.

            I do not accept any liability to you in relation to the advice given.

            It is always recommended you seek further advice from a solicitor or legal expert.

            Always read your lease first, it is the legally binding contract between leaseholder and freeholder.

            Comment


              #7
              Yes I've read that. One solicitor raised the fact that I might not be considered as a qualifying tenant seeing as I wouldn't serve the section 5 notice to myself. Therefore just 50% of leaseholders are qualifying tenants. This isn't concrete and I know I'd be taking a risk.

              The investors who have expressed interest in buying the freehold are not concerned about this having consulted their solicitors and from experience so it seems it does happen.

              Comment


                #8
                That makes sense, you can't really qualify to buy something you already own. The act is a bit grey when it comes to 2 flat freeholds. I think you will be fine to proceed without serving the notice on balance.

                Comment


                  #9
                  The smart thing to do, assuming there is no mortgage, is/was to surrender the lease and offer for sale the freehold to one investor and sell the flat with a new 125 year lease.

                  That way the premises dont qualify- there is only 1 QT and therefore the QT's cannot exceed 50%

                  The issue for qualification for something you own doesn't arise as you should not be able to hold and register a FH and a LH in the same name.

                  If you extended HMLR must have registered it and therefore the names of the FH and LH owners must vary. Notice then must be served.

                  The simple answer is this determine a price serve notice on both the registered leaseholders of both flats and reply to the freeholder as LH of one saying that you will not exercise the rights.

                  As above, 50% rule applies, and you advise the other LH that you are proceeding with the sale as they alone cannot exercise the rights.
                  Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                  Comment


                    #10
                    Originally posted by leaseholdanswers View Post
                    The simple answer is this determine a price serve notice on both the registered leaseholders of both flats and reply to the freeholder as LH of one saying that you will not exercise the rights.

                    As above, 50% rule applies, and you advise the other LH that you are proceeding with the sale as they alone cannot exercise the rights.
                    You might hit the same problem I did when trying this tactic, although from the opposite side buying FH not selling. I contacted several solicitors, all leasehold specialists, plus the sellers solicitor and they all erred on the side of caution and would not proceed until the notice expired, even though in theory once below the required 50% majority the process ends.

                    Comment


                      #11
                      Originally posted by leaseholdanswers View Post
                      The issue for qualification for something you own doesn't arise as you should not be able to hold and register a FH and a LH in the same name.

                      If you extended HMLR must have registered it and therefore the names of the FH and LH owners must vary.
                      LHA I have seen this mentioned before. In my case LH 1 is me and Mrs DNM (our surnames differ), LH 2 is a third party, I plan to register FH in my name only, will that satisfy HMLR requirements?

                      Comment


                        #12
                        But if the FH is transfered presumably from Mr DNM & Mrs DNM to Mr DNM that in itself is a transfer that triggers R2FR.

                        Serve the notice as suggested it's all done in 2/3 days.
                        Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                        Comment


                          #13
                          Originally posted by leaseholdanswers View Post
                          But if the FH is transfered presumably from Mr DNM & Mrs DNM to Mr DNM that in itself is a transfer that triggers R2FR.

                          Serve the notice as suggested it's all done in 2/3 days.
                          No, in my case Section 5 has been issued, expired and solicitors dealing with purchase of FH. But the issue with owning both the FH and LH and registering with HMLR does the joint names on lease and single name on FH pass the HMLR requirements?

                          Comment


                            #14
                            Originally posted by DNM2012 View Post
                            You might hit the same problem I did ....... even though in theory once below the required 50% majority the process ends.
                            That advice would be wrong, this is after all what I do.
                            Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                            Comment


                              #15
                              Originally posted by DNM2012 View Post
                              No, in my case Section 5 has been issued, expired and solicitors dealing with purchase of FH. But the issue with owning both the FH and LH and registering with HMLR does the joint names on lease and single name on FH pass the HMLR requirements?
                              Yes, it would.

                              However if you plan to sell the FH in the future, I suggest that you purchase it in the name of a company as then you can sell the company, which owns the FH, and avoid the R2FR.

                              If you, "otoh", offer to involve the other LH, it means that you have the means and "rules" in place.
                              Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                              Comment

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