What Are Section 5 Notices

If you are selling the freehold of a building that has been converted into two or more flats the chances are that you will have to give the leaseholders the “right of first refusal”. What this means is that the leaseholders must be given the opportunity to purchase the freehold on the sale terms that you have agreed to sell it for.

If they decide to go ahead with the purchase they will have to match your offer. In some circumstance the leaseholders will not qualify to buy the freehold but this is the exception and not the rule.
Who Serves The Notices?

Your solicitor will normally serve the notices on your leaseholders as soon as you have received an offer for the freehold. He will write to them stating what the offer is and telling them that they have two months in which to decide whether or not they want to buy the freehold. If they do not respond to the notice in the two month window you may go ahead and sell the property.

If they want to go ahead with the sale they must formally notify you by serving a notice on you stating that they want to acquire the freehold. This will normally be sent to you via the solicitor that is acting for them. They need to have a majority of more than 50% of the leaseholders to qualify as buyers. So a block of 10 flats must have agreement from 6 of the leaseholders if they want to go ahead with the sale.
Purchase Price Of The Freehold

The leaseholders can’t negotiate a lower price with the freeholder for the sale of the freehold. They have to pay the price that is stated on the section 5 notice. Once they have notified the landlord of their intention to proceed they must adhere to a time frame that is set out by the act. More information can be found on this subject at the Leasehold Advisory Service that is expert on all residential leasehold matters.