What is Right of First Refusal (Leasehold)?

Full Definition

The right of first refusal is a statutory protection, under the Landlord and Tenant Act 1987, requiring the landlord of most blocks of flats with qualifying leaseholders to formally offer those leaseholders the opportunity to collectively buy the freehold before selling it on to an outside third party, rather than the freehold being sold to a new landlord without the leaseholders ever having the chance to bid. To trigger the right, the landlord must serve a formal notice (a "Section 5 Notice") on the qualifying leaseholders setting out the proposed sale price and terms, giving them a set period, typically at least two months, to respond and indicate whether they wish to purchase collectively on the same terms; if enough qualifying leaseholders accept, they can go on to complete the purchase as a group, usually through a specially formed company set up to hold the freehold. If the landlord sells the freehold to a third party without offering the right of first refusal where it was legally required, the leaseholders can generally still apply to the First-tier Tribunal to force the new owner to sell the freehold to them on the same terms as the original, unlawful sale. The right of first refusal is distinct from -- though related to -- collective enfranchisement, which gives qualifying leaseholders a separate statutory right to force the purchase of the freehold even where the landlord has no current intention to sell, rather than simply being a right to match an offer the landlord has already decided to accept from someone else.

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