We are a block of ten flats. We have been negotiating the purchase of the freehold for 18 months with the help of a solicitor. But we have just been informed out of the blue by the freeholder that he has sold it to another party (a company associated with the freeholder’s company).
We think that under the Landlord and Tenant Act 1987 the freeholder has infringed our right to be offered of first refusal to buy the freehold. Please advise if this is the case and what we do about it.
The FPRA replies:
Without looking at the correspondence which has passed in respect of the negotiations regarding the freehold it is difficult to advice and whilst on the face of it, the disposal seems to have triggered the rights of first refusal, you should be aware that there are certain exemption contained in the legislation i.e. there are certain disposals that will not trigger the rights of the first refusal.
For example, some of the common exemptions are:
- grant of single tenancies: the disposal must apply to the whole building – the landlord is free to grant tenancies of individual flats;
- grant of a mortgage: where the landlord obtains a mortgage or a loan on the security of his interest;
- disposal to a receiver or trustee in bankruptcy: the transfer of the estate to the receiver, liquidator or trustee in the first instance is an exempt disposal. However, any subsequent disposal by the receiver, liquidator or trustee will not be exempt and the tenants will need to receive notice of their rights;
- disposal to an associated company: this is where the interest is transferred as an asset to another company, which has been associated with the parent company for at least two years. Therefore, for example, a landlord which is a company may transfer its freehold of a block of flats to an associated company. Tenants are not able to exercise the RFR in this case, but should investigate, through the Registrar of Companies, that the associated company has been associated for the requisite two years prior to the transfer;
- disposals arising from collective enfranchisement under 1993 Act;
- certain sales in connection with matrimonial and family proceedings;
- a sale by two or more persons of the same family to a different combination of the same family (or a transfer by family members to fewer of their number);
- sales to the Crown or to Government departments
As you will see, it looks like perhaps the disposal to the associated company might well fall within the fourth bullet point category above?
To be able to advise fully on the matter a solicitor would need to investigate further into the matter, but looking at the exemptions it looks like the rights of first refusal may well have not been triggered.
If the leaseholders are keen to purchase the freehold, have they considered making an application for the freehold under the 1993 collective enfranchisement provisions?