Right of first refusal

Where the right applies, careful handling is essential. A failure to follow the statutory process can delay or undermine transactions and expose parties to significant legal and commercial consequences.

Our leasehold and enfranchisement solicitors advise on the right of first refusal at every stage, from initial compliance and transaction planning through to enforcement where the statutory process has been ignored.

What is the right of first refusal?

Where the right applies, a landlord must offer the property to the qualifying leaseholders before disposing of it to anyone else. The offer must be made on the same terms as the proposed sale to a third party.

The right is governed by detailed legislation which determines when it applies, how it must be offered and how leaseholders must respond. The process is technical and prescriptive, and small errors can invalidate the procedure entirely.

When does the right apply?

The right of first refusal does not apply to every building or every disposal. Whether it arises depends on the specific characteristics of the building and the nature of the transaction.

Uncertainty commonly arises in relation to mixed-use buildings, company ownership structures, share transfers and linked transactions. These are also the situations where the right is most often overlooked or misapplied.

Section 5 notices

The statutory process is set out in the Landlord and Tenant Act 1987 and is triggered by the service of a formal section 5 notice. This notice must be served on all qualifying leaseholders and must comply strictly with the requirements of the legislation.

A valid section 5 notice sets out the terms of the proposed disposal and gives leaseholders defined statutory periods to decide whether to accept the offer. In most cases, leaseholders have two months from service of the notice to accept the offer. If the offer is accepted, further statutory steps and deadlines must be met before the transaction can proceed.

The legislation does not require the landlord to negotiate the price or terms offered, and any change to the proposed sale terms will usually require a new section 5 notice to be served.

Errors in the content, service or timing of a section 5 notice can invalidate the process. Proceeding with a sale before the notice procedure has been properly completed may result in a breach of the legislation.

Timing and risk

Time limits under the right of first refusal are fixed by statute and leave little room for flexibility. Leaseholders who miss statutory deadlines may lose their rights, while landlords who act too early or rely on defective notices risk criminal liability and enforcement action.

For purchasers, failures in the process can come to light after completion, drawing them into disputes despite having acted in good faith. Identifying and addressing these risks early is critical.

How our solicitors can help

We advise leaseholders, landlords and purchasers on all aspects of the right of first refusal, including:

• Confirming whether the right applies to a particular building or transaction.
• Advising on exemptions and complex ownership or disposal structures.
• Drafting, serving and reviewing section 5 notices.
• Advising purchasers on transactional risk and due diligence.
• Enforcing leaseholders’ rights where the statutory process has been ignored or mishandled.

Why early legal advice matters

The right of first refusal is an area where technical detail and timing matter as much as commercial judgement. Once a sale has progressed, options can narrow quickly, and costs can escalate.

Our leasehold and enfranchisement solicitors have extensive experience advising on right of first refusal issues alongside collective enfranchisement, lease extensions and leasehold disputes. We regularly work with managing agents, valuers and transactional advisers to ensure issues are identified early and dealt with decisively.

Contact us today for clear, practical advice on the right of first refusal. Our expert leasehold and enfranchisement solicitors are ready to help you protect your interests, reduce risk and keep your transaction on track.