Sale and purchase of freehold

Collective Freehold purchase is the process by which a group of Leaseholders, typically flat-owners, buy their building’s Freehold together.

The process:

Leaseholders must meet several conditions to collectively purchase the building’s Freehold. In particular, more than 50% of Leaseholders in the building must participate in the claim. We can advise Leaseholders on whether they satisfy the conditions and are qualified to bring a claim.

Provided the Leaseholders qualify, there are two ways to proceed:

1. The non-statutory route: where terms are agreed between the Leaseholders and Freeholder.
2. The statutory route: where the Leaseholder serves a Section 13 Notice to the landlord.

Before proceeding with either route, we strongly recommend the Leaseholder and co-Leaseholder(s) enter into a participation agreement. The Leaseholder must also decide whether they and their co-Leaseholders will be purchasing the Freehold as individuals or through a Company. We can advise on options and assist with setting up a Company.

Option 1: The non-statutory route:

If the Freeholder is agreeable, the Leaseholders and Freeholder can agree terms for the sale of the Freehold without following the formal statutory procedure.

We can act for Leaseholders and Freeholders to review any proposed terms or offers, advise on the practical and legal implications, and negotiate or renegotiate the terms on your behalf.

Once terms are agreed, the parties move to complete the purchase and register the transfer at the Land Registry.

Option 2: The statutory route:

1. Formal notice: Participating Leaseholders serve a formal notice, known as a section 13 notice, on the Freeholder.
2. Freeholder response: The Freeholder has the right to serve a Counter-notice in response. This will confirm whether they accept the claim, and what terms are agreed or not agreed upon.
3. Negotiation: The parties then have a period to agree terms and complete the purchase of the Freehold. If terms cannot be agreed, the Leaseholders must, within six months of the date of the Freeholders’ Counter-Notice, apply to the Leasehold Valuation Tribunal (LVT) to determine the position.
4. Completion of sale: Once terms have been agreed, the parties move to complete the purchase and register the transfer at the Land Registry.

Typical timescales: It usually takes between 9-12 months, although this can vary depending on the complexity of the matter and whether tribunal proceedings are required.

Leaseholders have the right of first refusal. This means that a landlord cannot sell their Freehold to a third party without informing the Leaseholders and giving them the right to collectively purchase the Freehold.

This is done by serving a Section 5 Notice. Failure to comply with these requirements can have significant legal consequences.

If you are a Leaseholder who has received a Section 5 Notice, strict deadlines apply, so it is important to seek legal advice as soon as possible.

The Process:

The exact process varies slightly, depending on whether a section 5A, 5B, or 5C notice is served. However, the general steps remain the same:

1. Section 5 Notice: The Freeholder serves a formal Section 5 Notice on the qualifying Leaseholders setting out the proposed sale price, terms and conditions. We can advise and prepare the appropriate notices.
2. Leaseholders’ decision period: Leaseholders have two months from receipt of the notice to decide whether to accept the offer collectively by serving a Section 6 Acceptance Notice. (To proceed, more than 50% of the building’s qualifying Leaseholders must participate.) We can review the notice and advise leaseholders on proceeding with the purchase.
   In most cases, if a Leaseholder wishes to buy the Freehold, they must also form a company. The company will become the legal owner of the Freehold. If they live in a smaller block of flats, Leaseholders may buy the Freehold in their individual names.
3. No negotiation of terms: When dealing with a right of first refusal, there is no option to negotiate the premium or terms of the Freehold purchase. If the Leaseholders wish to proceed, they must accept these terms and the premium set out in the Section 5 Notice.
4. Nomination notice: Following acceptance of the offer, the Leaseholders have a further two months to serve a ‘Nomination Notice’ confirming who will be buying the Freehold – the ‘nominee purchaser’ company formed for this purpose or the individual Leaseholders.
5. Completion of the sale: Once the nominee purchaser has been appointed, the final stage is to agree the transfer document, exchange contracts, and complete the transfer.

It usually takes between 4-6 months, although this can vary depending on the specific circumstances.