Right of First Refusal, Leaseholders' Rights When a Freehold Is Sold

What is the Right of First Refusal?

The right of first refusal (RFR) gives qualifying leaseholders the statutory right to be offered the opportunity to purchase the freehold, or any other relevant disposal, before the freeholder sells it to a third party on the open market. The right is created by Part I of the Landlord and Tenant Act 1987 (as amended) and applies to most residential buildings in England and Wales.

The right of first refusal is separate from and different to the right to collectively enfranchise (compulsorily purchase the freehold under the Leasehold Reform Housing and Urban Development Act 1993). The key distinction is that RFR is reactive, it is only triggered when the landlord voluntarily decides to sell, whereas collective enfranchisement is a proactive right that leaseholders can exercise at any time.

Which Buildings Qualify?

The Act applies to a building where:

• More than 50% of the flats are held by qualifying tenants (broadly, long leaseholders with leases originally granted for more than 21 years)
• The landlord owns the freehold (or a superior leasehold interest) of the whole building
• The building contains two or more flats

Key exclusions include buildings where more than 50% of the internal floor area is non-residential, resident landlords who occupy a flat in a building with no more than four units, and certain other categories.

How the Process Works

If the requisite majority of qualifying tenants do not accept within the acceptance period, the landlord is free to sell to a third party, but only at no less than the price stated in the offer notice, and within a further 12-month period.

What if the Freeholder Sells Without Offering RFR?

This is a criminal offence under the 1987 Act. If a landlord disposes of the relevant interest without first serving a valid offer notice, qualifying tenants have the right to compel the new owner (the purchaser) to sell the freehold to them on the same terms within 12 months of becoming aware of the disposal. This is a powerful remedy but requires prompt action once leaseholders learn of the sale.

The Leasehold Advisory Service (LEASE) provides free guidance and initial advice to leaseholders seeking to exercise or protect their RFR rights.

Right of First Refusal vs Collective Enfranchisement

Property Passport UK displays tenure and leasehold information for registered properties. If you are a leaseholder and you have reason to believe your building's freehold has been sold without an offer being made, seek urgent specialist advice from a leasehold solicitor or contact LEASE.