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Section 5 (5A) Notice

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Section 5 (5A) Notice

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About

A Section 5A is a notice served by a landlord to a leaseholder informing them of their intent to sell the freehold. Leaseholders have the legal right of first refusal to purchase the property freehold prior to it being listed on the open market. The notice itself must be served in accordance with the terms of the tenancy agreement or it could be considered invalid and thrown out by a judge.Next steps

How much does a Section 5 (5A) Notice cost?

The cost for a licensed solicitor to help with a Section 5 (5A) Notice is dependent on many factors including the complexity and specific requirements of the case. On average it is expected to range from £100-£180 but in some cases it could cost as much as £300.

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How Our Solicitors Can Help with Section 5A Notices

Our team of expert landlord and tenant solicitors can help navigate the process of sending and responding to section 5A notices, as well as help manage the process of buying and selling a share of freehold.

  • Advising landlords on legal compliance: Our solicitors can help landlords draft and serve a valid section 5A notice, ensuring compliance with the legal requirements and avoiding potential disputes

  • Supporting tenants with the purchase process: Our experts can represent tenants in negotiations, help them organise the collective purchase, and ensure they meet all legal deadlines to buy a freehold property.

  • Dispute resolution: Our solicitors can assist in resolving disputes between landlords and tenants, whether through negotiation, mediation, or legal action if necessary.

Why Choose Lawhive for Section 5A Notice Advice?

We're not like your average law firm. Getting advice from a Lawhive solicitor guarantees all of the below:

  • Expertise in Leasehold Property Law: Every solicitor we recommend has experience in handling section 5A notices, helping both landlords and tenants understand and comply with their legal obligations

  • Tailored Legal Support: Provide personalised legal advice based on your specific needs, ensuring the right of first refusal is handled smoothly and efficiently

  • Cost-Effective and Efficient Services: We use technology to streamline the legal process, offering you affordable and fast legal services for handling section 5A notices

Who Qualifies for Section 5A Notices?

A section 5A is a formal notice served by a landlord to qualifying tenants (leaseholders) informing them of their intent to sell the freehold. It gives leaseholders the right to purchase the property freehold before it is listed on the open market and sold to a third party. This gives leaseholders the opportunity to take control of their building. 

Tenants must meet certain eligibility conditions to qualify to purchase their leasehold under section 5A. The main eligibility criteria are:

  • Qualifying tenants must have had a minimum of 21 years on their lease when it was originally granted

  • At least two-thirds of tenants must be qualified

  • Over 50% of the qualifying tenants must agree to purchase the freehold, known as collective enfranchisement

What Are Tenants’ Rights to First Refusal?

Section 5A of the Landlord and Tenant Act 1987 gives qualifying tenants the right of first refusal. Freehold building owners are generally required to offer the freehold interest jointly to flat owners before selling to a third party.

Can the Right of First Refusal Be Waived?

Yes, rights of first refusal can be waived by landlords, but there are only very few exemptions. These include:

  • When the property only contains one flat

  • When the property is converted into houses

  • The disposal to an associated company – when the freehold is transferred to another company which has been associated with the transferring company for at least two years

  • A sale by two or more people of the same family to a combination of the same family

Landlord Obligations for Section 5A Notices

Landlords have a legal requirement to offer leaseholders the right of first refusal when looking to sell a freehold. They also must follow the correct legal procedure when serving a section 5A notice, including providing the correct information about the sale, such as the terms and the asking value.

The notice must be served in accordance with the terms of the tenancy agreement or it could be considered invalid and thrown out by a judge. Landlords may face legal consequences if they fail to serve a valid section 5A notice or attempt to sell the property without offering it to the tenants first, including fines or having the sale declared invalid.

Failure to comply with the statutory requirements of section 5A can be a criminal offence.

What Information Should a Section 5A Notice Include?

Section 5A notices, under the Landlord and Tenant Act 1987, should include the following:

  • Address: The full address of the freehold up for sale

  • Freeholder Contact Details: The contract details for the freeholder

  • Property: Details of the property being sold

  • Terms: The terms of the sale

  • Notice: The timeframes that leaseholders have to respond in and appoint a purchase

Tenants Guide: How to Respond to a Section 5A Notice

Tenants typically only have a two-month window to respond to a notice so they must be organised in order to decide whether they will buy the freehold before the notice expires.

Organise a Tenant Group

A tenant group, known as a tenant association, is a group formed by leaseholders who live in the same building or development. They are used to represent the group’s interests to negotiate with freeholders over aspects of purchasing the freehold of a property. The alternative to creating a tenant group is to appoint a solicitor to represent the group.

Accept or Make a Counteroffer

After receiving a 5A notice, which includes the landlord’s valuation and terms, tenants can either accept the terms set out by the landlord or make a counteroffer, negotiating more favourable terms before committing to the purchase. Working with an experienced solicitor and surveyor can help tenants negotiate more favourable terms.

What Happens Once Leaseholders Accept?

When leaseholders decide to accept their freeholder's offer, the qualified flat owners need to formally write to accept the offer and begin the contract process. The nominee purchaser is sent the contract to sign within one month of the freeholder being notified of their nomination.

Contracts are exchanged within seven days. The nominee purchaser then has two months to return the contract when they receive it and pay the deposit, usually 10% of the purchase price. After contracts are exchanged, the sale will be completed on the date specified in the contract.

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Grounds for Disputes in Section 5A Sales

Disputes in section 5A sales can derail the entire transaction process. The most common grounds for section 5A sales disputes are:

  • Disagreements Over the Sale Price: The price of the freehold can lead to disputes between landlords and tenants when each side has a different value in mind. To reduce the risk of sale price disputes, in the first instance get an independent valuation from a trusted surveyor.

  • Challenges to the Validity of the Notice: Tenants may challenge the validity of the section 5A notice if the landlord fails to meet legal requirements for notice, ignores leaseholders' right of first refusal, or provides incorrect information about the sale.

  • Failure to Complete the Sale: There are legal consequences for either party if they fail to complete the sale within the required timeframe, including the possible extension of deadlines or enforcement actions.

Does a Section 5A Notice Expire?

Leaseholders have an initial offer period, typically of two months after receiving a section 5A notice, during which they can express their interest in purchasing the freehold. If they do accept the right of refusal first offer, qualifying leaseholders have a further two months to nominate a purchaser to complete the purchase.

Costs and Solicitor Fees Involved

Landlord legal fees include costs for solicitors drafting and serving a section 5A notice, as well as legal fees for responding to any challenges or disputes that arise. Tenant legal fees include potential costs for seeking legal advice on their right of first refusal, including negotiating the terms of the purchase and handling disputes.

The cost for a licensed solicitor to help with a section 5 notice is dependent on many factors including the complexity and specific requirements of the case. On average, it is expected to range from £100-£180 but in some cases, it could cost as much as £300.

Section 5A notices are instrumental when freeholders want to sell their interest in a freehold, and tenants want to buy their building’s freehold and gain control of their building. If you need more support in serving a section 5A notice or responding to one, get in touch with our landlord and tenant solicitors today.

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