Residential Leasehold Property : Right of First Refusal

Right of First Refusal

Residential Leasehold solicitors in Dorset dealing with The Right of First Refusal

Buying the freehold means that you can jointly with other leaseholders, own the land on which your property was built. You may not have to renew your lease again, which can cost thousands of pounds. 

The Aim

The leaseholders can be granted a share in the Company that owns the freehold or head-leasehold interest. This can enable the Company to:

  • Grant extended leases and reduce the ground rent payments
  • Amend the terms of the flat leases. For more information in connection with extending your leases following your freehold purchase, please see our page Preparation of your New Leases.


  • A freeholder or the owner of a head lease proposing to sell their interest which contains flats must offer that interest to leaseholders before selling on the open market. This right of the leaseholders is known as the Right of First Refusal. 
  • Any offer can only be accepted by more than 50% of the leaseholders. If the participating leaseholders reduces to 50% or less, the nominated company or person must advise the landlord and the leaseholders must withdraw.
  • There are a few exceptions to this right. A freeholder is not put through this Right of First Refusal process in the following circumstances:
    • More than 50% of the building is used for non-residential (commercial) use
    • The freeholder is a Local Authority 
    • The freeholder is a registered social landlord 
    • The freeholder is selling the building between certain family members.


  1. The freeholder or head-leaseholder must serve a formal notice on the leaseholders offering the interest to them first. The Offer Notice will state the terms of the proposed disposal of the interest, in particular the sale price - although there are separate provisions for a sale by auction. The Offer Notice will state a date by which the offer can be accepted - which must be not less than two months from the date of the Offer Notice - and a further date by which the leaseholders must serve a Nomination Notice nominating the company or person which will acquire the landlord’s interests on behalf of the leaseholders. This date must be not less than a further two months later. 
  2. The participating leaseholders normally incorporate a company as their nominee to purchase the landlord’s interest on their behalf. Following this, the leaseholder’s will send their Nomination Notice. 
  3. Either party can withdraw at any time prior to contracts being exchanged. After the participating leaseholders have served the Nomination Notice, the legislation sets out a timetable for the provision of a draft contract, the agreement of the form of contract and the exchange of contracts (which is the point where neither party can withdraw). 
  4. When contracts are exchanged a completion date will be agreed and inserted in the contract with a view to the sale of the landlord’s interest to the participating leaseholders’ nominee completing on that date.

What if?

  • It is a serious matter if a freeholder or head-leaseholder fails to offer Right of First Refusal to his leaseholders. It is a criminal offence and he and his agent - if convicted - can be fined up to £5,000. In addition, in those circumstances the leaseholders can enforce a procedure requiring the new owner of that interest to sell the interest in the property to them on the same terms as the landlord acquired the interest.
  • A landlord who serves an Offer Notice will sometimes, but not always, have a prospective purchaser lined up at the price stated in the Offer Notice. Where leaseholders do not accept the Right of First Refusal, the landlord can sell his interest at the price offered (or higher) to the buyer waiting in the wings or - if none - by way of a sale on the open market. However, the landlord cannot sell the interest within 12 months at a lower price than that offered or on different terms. 

For a free initial chat with one of our expert residential leasehold property solicitors to discuss how we can help you, please contact us now.

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As a company Coles Miller have been very supportive of which I am grateful to all those involved.