Have you received a Section 5 Notice and are unsure what you need to do next, in this article Leasehold Property Expert, Kerry Martin, explains the next steps and more…
What is a Section 5 Notice?
A Section 5 Notice is essentially an offer.
Landlords must serve a Section 5 Notice to the flat owners before they dispose of certain assets in a building of residential flats. It offers to make that disposal to you (and your neighbours in the building). This process is known as the “Right of First Refusal”.
In this article, we focus on a freeholder hoping to sell the freehold of a building containing residential flats.
What must a Freeholder do before they sell the freehold?
The freeholder must first offer the freehold to the flat owners in the building before they can sell it to anyone else. It is a criminal offence for a freeholder to sell the freehold to a third party without first offering it to the flat owners.
The Right of First Refusal is triggered in a building that meets the following criteria:
- The premises contains 2 or more flats held by qualifying tenants (i.e. leases granted for more than 21 years);
- The number of flats held by qualifying tenants is more than 50% of the total number of flats in the premises.
How to respond if I receive a Section 5 Notice?
In order to accept the freeholder’s offer, more than 50% of the flat owners in the building will need to join together to accept the offer.
For example, if there are ten flats in the building, at least six will need to join together, and in a building of just two, both would need to join together.
You are therefore best advised to speak with your fellow flat owners to see how much interest there is in your building.
If the offer is not formally (and correctly) accepted within the appropriate timetable, the freeholder can sell to whoever they wish; and not necessarily you.
What is the timeline for a Section 5 notice?
There are strict timetables involved where a Section 5 Notice has been served. Your fellow flat owners in the building will likely have received identical notices, and they will be subject to the same strict timetables.
A formal ‘acceptance notice’ would need to be served by the group of interested leaseholders, within two months of the offer.
What should an acceptance notice look like (Section 5 Notices)?
The acceptance notice must be in a specific format when sent to the freeholder. An email, telephone call or letter is not sufficient.
It also needs to contain prescribed information relating to the flat owners who wish to participate, so it is best prepared and served by a specialist lawyer familiar with the Right of First Refusal process and legislation.
You can contact our expert leasehold team on 01202 499255, who will be happy to help you draft and serve an acceptance notice.
A further step, known as ‘nomination’, is then required within a further two months of acceptance. Again, this must be in a specific format and best carried out by a specialist lawyer.
What is the right of first refusal?
The right of first refusal applies to buildings containing residential flats and is the process whereby a landlord (usually a freeholder) is required to offer to the flat owners an asset they are planning to sell; usually, the freehold of that building.
You can read our dedicated article on the right of first refusal here.
Specialist Leasehold Experts
If you have received a Section 5 Notice and would like to speak to an expert, you can speak to a member of our team by calling 01202 499255, or by filling out the form.
We offer all new clients a free initial chat.
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