If a leaseholder receives a Right of First Refusal Notice, often called a ‘Section 5a’ or ‘Section 5b’, it is important to view this as a great opportunity, possibly even a ‘dream come true’ if you have previously thought about buying your freehold and decided it was all too complicated.
If you successfully purchase the freehold of your building - whether through the usual route or following the receipt of a Section 5 Notice - you will get rid of your freeholder once and for all. This means that you and your neighbours will take control of the ownership and running of your building, inevitably also saving you a considerable amount of money every month. You and your neighbours will transition from long-term leasehold ‘renters’ to actual freehold property owners. What’s not to like?
However, it is important to note that a Right of First Refusal Notice comes with its own set of issues that you will have to overcome before you are successful in buying your freehold. Most important are the very tight statutory timelines to be strictly adhered to throughout this legal process. If you miss any of these statutory timelines, even by one day, you will lose the legal right to purchase your freehold in this manner.
Our considerable experience of these freehold purchases has taught us that the first deadline is usually the most challenging to meet. From the date provided on the initial Section 5 Notice, you have exactly two months to serve an Acceptance Notice on your freeholder, which confirms your intent to buy. The legal qualification for you to be able to serve the Acceptance Notice requires that most leaseholders, i.e. more than 50%, agree to act at the same time. If you are unable to get the agreement of this number of leaseholders, you will not be able to proceed to the next stage.
The challenge in coordinating the serving of an Acceptance Notice often revolves around your ability to contact all the leaseholders in your building or estate, many of whom will not actually live there. Those leaseholders will have to understand and accept the benefits of purchasing their share of the freehold as well as understanding the benefits of purchasing the freehold through the Right of First Refusal. You will also need to examine the price you have been offered to establish if it is a good fair price or it is overpriced (see our previous blog). You will also need to negotiate with a specialist surveyor and solicitor to represent you through this process. And you have only two months to do this!
Is it worth the effort and stress to do all this? In our experience buying your freehold through the Right of First Refusal is often the cheapest, easiest and least stressful way of buying your freehold so, yes, it is worth looking into. Keep your eye out for our future blogs which will explain this in more detail. It is also worth remembering that if you fail to buy your freehold when it offered to you, the new purchaser will often be a professional ground rent investor who will be looking to make as much profit from you as they possibly can.
Get in touch to find out how we can help you; in fact, our involvement might only be needed to get you through the first important deadline of serving the Acceptance Notice. We will calculate the true value of your freehold and establish whether there is a discount in the price offered within the Section 5 Notice, so you know whether or not it represents a good deal, and we then contact all leaseholders and meet/speak with as many of them as possible to explain the benefits and the process. This gives you the best chance of meeting the two-month deadline by when at least 50% of the qualifying leaseholders need to have served an Acceptance Notice.
To find out more, please visit s5solutions.co.uk.
And look out for our next blog which will explain the legal process.