Quick Answers
Does the right of first refusal apply to my block?
It applies to premises with two or more flats where more than half are held by qualifying tenants (leaseholders on leases originally over 21 years) and where no more than half the floor area is used commercially. Most residential blocks of flats qualify. There are specific exemptions for public sector freeholders and some charitable bodies.
What must the freeholder do before selling?
Serve a formal offer notice on each qualifying tenant setting out the proposed transaction in full, including the price and terms. The leaseholders then have at least two months to accept. If a requisite majority accept, they are entitled to acquire the freehold on those terms. Only if leaseholders decline or fail to respond can the freeholder proceed to sell to the third party.
What if the freeholder sold without serving the notice?
It is a criminal offence. The leaseholders also have a civil right to require the new owner to sell the freehold to a nominee purchaser at the same price paid. This right to compel a transfer from the new owner is one of the most powerful leaseholder remedies in the 1987 Act and can be exercised for up to four years after the original disposal.
The short answer: the right of first refusal under sections 5-10 of the Landlord and Tenant Act 1987 requires freeholders of qualifying residential blocks to offer leaseholders the right to buy before selling to a third party. Failure to serve the required notice is a criminal offence and gives leaseholders a civil right to compel the new owner to sell to them at the price paid. The right has existed since 1988 and is frequently ignored in practice, particularly in portfolio freehold transactions where the freehold of multiple buildings is sold in bulk.
The 2024 reform context: the Leasehold and Freehold Reform Act 2024 strengthened the right of first refusal in several respects, including improving leaseholders' access to information about proposed disposals and strengthening enforcement provisions. These changes are being brought into force progressively. The underlying right under the 1987 Act remains the primary mechanism.
Key Takeaways
The right applies on a wide range of disposals, not just outright sale
Most leaseholders think the right of first refusal only applies when the freeholder sells the freehold outright. In fact, the right is triggered by a much wider range of disposals under section 4 of the 1987 Act, including the grant of a head lease, assignment of the freeholder's interest, transfer to a connected company (with exceptions), and certain other transactions involving the freeholder's interest. Portfolio investors who routinely transfer freeholds between group companies without serving offer notices are often in breach.
The criminal offence applies to the freeholder, not the buyer
Section 10A of the 1987 Act makes it a criminal offence for a landlord to make a relevant disposal without first complying with the offer notice requirements. The buyer of the freehold does not commit an offence by purchasing — the criminal liability falls on the freeholder who failed to serve the notice. The buyer does, however, become subject to the civil remedy allowing leaseholders to compel a transfer from them.
Leaseholders need only a simple majority to accept the offer
Where the freeholder serves an offer notice, a requisite majority of the qualifying tenants who received the notice must accept for the right to be exercised. The requisite majority is more than half of those who received the notice. So in a ten-flat block where eight flats are held by qualifying tenants and all receive the notice, five or more must accept for the leaseholders to exercise the right collectively. Individual leaseholders who do not wish to participate do not block those who do.
The price is the same as the proposed third-party price
The right of first refusal does not involve an independent valuation in the way collective enfranchisement does. The leaseholders are entitled to acquire the freehold on the same terms, and at the same price, as the proposed third-party transaction. This means the freeholder cannot price the offer notice at a higher figure to deter leaseholders. If the third-party deal falls through after leaseholders decline, the freeholder must offer again before making another disposal on more favourable terms.
The four-year window to act after a missed notice sale
Where leaseholders discover that the freeholder sold without serving an offer notice, they have four years from the date of the original disposal to exercise their civil right to compel a transfer from the new owner. This is a relatively generous window, but leaseholders who become aware of an unlawful disposal should act promptly. The right requires a requisite majority of qualifying tenants to serve a notice on the new owner requiring them to transfer the freehold to a nominee purchaser at the price originally paid.
The right of first refusal and collective enfranchisement are complementary
The right of first refusal is not the same as collective enfranchisement and does not replace it. Collective enfranchisement is the right to compel a sale of the freehold at any time (at a price determined by statutory valuation). The right of first refusal only arises when the freeholder has decided to sell, and gives leaseholders the opportunity to step into the shoes of the proposed buyer. Many leaseholders who miss the opportunity to use the right of first refusal subsequently use collective enfranchisement to acquire the freehold from whoever bought it.
What the Right of First Refusal Is
The right of first refusal was created by the Landlord and Tenant Act 1987 and came into force in 1988. Its purpose was to prevent freeholders of residential blocks from selling to speculative investors, landlord companies, or property management conglomerates without first giving the people who actually live in and own flats in the building the opportunity to buy.
The mechanics are straightforward. When a freeholder decides to sell their interest in a qualifying residential building, they must first serve a formal notice on each qualifying tenant offering them the right to acquire the interest on the same terms as the proposed third-party transaction. The leaseholders have a defined period (at least two months) to accept. If a requisite majority accept, they can acquire the freehold. If they decline or do not respond, the freeholder can proceed with the third-party sale on terms no more favourable than those offered to leaseholders.
The right does not guarantee leaseholders will buy. It guarantees they will have the chance to decide, on equal terms, before anyone else acquires their building's freehold.
Even leaseholders who have no interest in collectively buying the freehold benefit from the right of first refusal. Its existence deters speculative freeholders from flipping residential freeholds rapidly to the highest bidder. The criminal sanction and the civil remedy create a real deterrent against disposal without notice. Leaseholders who are considering collective enfranchisement in future should also be aware that if the freeholder sells without serving notice, the enfranchisement right transfers to whoever bought the freehold — so the right to compel a transfer at the original price may be more immediately useful than a full enfranchisement process.
Which Buildings Qualify
The right of first refusal applies where all of the following conditions are met:
- The premises contain two or more flats held by qualifying tenants
- More than 50% of all the flats in the premises are held by qualifying tenants (leaseholders on leases originally granted for more than 21 years)
- No more than 50% of the internal floor area of the premises (excluding common parts) is used or intended for non-residential purposes
- The landlord is not an exempt landlord (see below)
Exempt landlords to whom the right of first refusal does not apply include: local authorities, housing associations, registered social landlords, certain charitable housing trusts, and bodies prescribed in secondary legislation. For the vast majority of private residential blocks, the freeholder is a private individual or company and the exemptions do not apply.
What Transactions Trigger the Right
The right of first refusal is triggered by a much wider range of transactions than most leaseholders realise. Section 4 of the 1987 Act defines a "relevant disposal" broadly to include:
- Outright sale of the freehold to a third party
- Grant of a head lease of the building or part of it
- Assignment of the freeholder's interest under an existing head lease
- Transfer to a connected or group company (with limited exceptions)
- Creation of a trust over the freeholder's interest
- Entering into a contract to make any of the above disposals
- Transfer between spouses or civil partners
- Transfer on death (to personal representatives)
- Transfer pursuant to a court order
- Transfer by a mortgagee exercising power of sale
- Transfer to a wholly-owned subsidiary (limited exemption)
- Gift to a family member in prescribed circumstances
One of the most commonly breached scenarios is a portfolio sale where a freeholder sells multiple building freeholds in a single transaction to an investor. The right of first refusal applies to each individual building in the portfolio, and the freeholder must serve offer notices for each qualifying building separately. A portfolio sale that bundles qualifying buildings together with non-qualifying ones does not avoid the obligation on the qualifying buildings. Leaseholders in buildings sold as part of a portfolio without individual offer notices being served should take legal advice urgently.
How the Process Works When the Freeholder Does Comply
Freeholder serves the offer notice (section 5 notice)
The offer notice must be served on each qualifying tenant individually. It must set out: the nature of the proposed disposal, the property to which it relates, the proposed terms (including the price), the period within which leaseholders can accept (at least two months), and the name of the proposed purchaser if one has been identified. The notice must give leaseholders enough information to make an informed decision about whether to accept.
Leaseholders consider and decide whether to accept
Each qualifying tenant who receives the notice has the acceptance period to decide whether to participate. There is no obligation to participate. Those who wish to accept serve an acceptance notice on the landlord within the acceptance period. Once a requisite majority (more than half of those who received the notice) have served acceptance notices, the right has been validly exercised. Leaseholders must then act quickly to nominate a purchaser and arrange funding.
Leaseholders nominate a purchaser and complete
Within the period specified in the Act (typically two months from the date the requisite acceptance is given), the accepting leaseholders must serve a nomination notice identifying the person or company that will acquire the freehold on their behalf. This is typically a specially formed company (or an existing RTM company). The nominated purchaser then completes the acquisition on the terms set out in the original offer notice. The price is the same as the proposed third-party price.
If leaseholders decline: the freeholder may proceed — on the same terms
Where leaseholders do not exercise the right (either because a requisite majority do not accept, or because the acceptance period expires without acceptance), the freeholder may proceed to dispose of the interest to a third party. However, they may only do so on terms no more favourable to the buyer than those contained in the offer notice. If the deal with the third party falls through and the freeholder later proposes a disposal on more favourable terms, they must serve a fresh offer notice on leaseholders before proceeding.
What Happens If the Freeholder Sells Without Serving the Notice
Where a freeholder makes a relevant disposal of a qualifying building without first serving the required offer notice on qualifying tenants, two consequences follow: a criminal offence is committed, and leaseholders acquire a civil right to compel a transfer from the new owner.
The criminal offence
Section 10A of the 1987 Act makes it a criminal offence for a landlord, without reasonable excuse, to make a relevant disposal without complying with the offer notice requirements. The offence is committed by the freeholder who disposes, not by the person who acquires. Prosecutions are relatively rare in practice but the provision is real and the risk of prosecution is a genuine deterrent, particularly for institutional freeholders with reputational concerns.
The civil remedy: compelling a transfer from the new owner
The more immediately useful remedy for leaseholders is the civil right under sections 11-17 of the 1987 Act. Where the freeholder has made a relevant disposal without serving the required notice, qualifying tenants can serve a notice on the new owner (the person who acquired the interest) requiring them to transfer the interest to a nominee purchaser at the same price as was paid in the original disposal.
This right can be exercised for up to four years after the original disposal. The requisite majority of qualifying tenants must participate. The new owner has no general right to refuse, though they can dispute whether the qualifying conditions were met.
The four-year window runs from the date of the original disposal, not from when leaseholders became aware of it. A leaseholder who discovers in 2026 that their freehold was sold in 2023 without an offer notice has until 2027 to act. A leaseholder who discovers in 2026 that the sale was in 2021 may have limited time remaining. If you suspect your freehold was sold without the required notice being served, take legal advice immediately to establish whether the remedy is still available.
What the Leasehold and Freehold Reform Act 2024 Changed
| Change | What It Means in Practice |
|---|---|
| Improved information rights | Leaseholders now have stronger rights to obtain information about proposed disposals from the freeholder before and after a transaction takes place. This helps address the information asymmetry that allows freeholders to complete disposals without leaseholders becoming aware of them in time to exercise the right. |
| Strengthened enforcement provisions | The 2024 Act enhanced the enforcement mechanisms for leaseholders whose right of first refusal was ignored. The practical impact on the core civil remedy (the right to compel transfer from the new owner) is being established through case law and secondary legislation. Confirm current implementation with a specialist leasehold solicitor. |
| Interaction with extended enfranchisement rights | The broader enfranchisement reforms in the 2024 Act (reduced costs, abolition of marriage value, extended lease terms) make collective enfranchisement more accessible. Where leaseholders miss the right of first refusal window, enfranchisement is a more viable fallback route than it was before the Act. The two rights are complementary. |
| Right of first refusal and commonhold | The government's direction is ultimately to move to commonhold, which would eliminate the freeholder/leaseholder relationship and the right of first refusal with it. In the meantime, the 1987 Act right remains the operative protection for the four million leaseholders in existing leasehold blocks. Commonhold is years away for existing stock. |
For the statutory route to acquiring the freehold at any time (not just when the freeholder decides to sell), see Leasehold Enfranchisement in 2026: How to Force Your Freeholder to Sell the Freehold. For what happens after leaseholders acquire the freehold, see AGM Guide for RTM Companies and Block Management in East London and Essex.
Frequently Asked Questions
The right of first refusal under the Landlord and Tenant Act 1987 requires a freeholder of a qualifying residential block, before making certain disposals of their interest (including selling the freehold), to first offer qualifying leaseholders the right to acquire on the same terms. Leaseholders have at least two months to accept. If a requisite majority accept, they can buy the freehold at the proposed price. Failure to serve the required notice is a criminal offence and gives leaseholders the right to compel a transfer from whoever bought the freehold.
Premises with two or more flats where more than half are held by qualifying leaseholders (leases originally over 21 years) and where no more than half the floor area is commercial. Exempt landlords include local authorities, housing associations, and certain charitable bodies. Most private residential blocks of flats qualify.
It is a criminal offence under section 10A of the 1987 Act. Leaseholders also have a civil remedy: they can serve a notice on the new owner requiring them to transfer the freehold to a nominee purchaser at the same price paid. This right is available for up to four years from the original disposal. Act promptly if you discover an unlawful disposal.
At least two months from the date the offer notice is served. Where a requisite majority (more than half of those who received the notice) serve acceptance notices within that period, they have exercised the right and have a further period (typically two months) to nominate a purchaser. Do not wait until the deadline to start organising a response: funding, nominee company formation, and legal advice all take time.
In most cases yes. The right is triggered by intra-group transfers unless a specific exemption applies (primarily transfers to wholly-owned subsidiaries, within narrow conditions). Freeholders who restructure their holding companies and transfer freeholds between group entities without serving offer notices are frequently in breach. Leaseholders who become aware of such transfers should take legal advice promptly to establish whether the four-year remedy is available.
Has your freehold changed hands without you being offered the right to buy first?
If you believe the right of first refusal was not complied with when your building's freehold was sold, you may have a live remedy. Take specialist leasehold legal advice promptly to establish whether the four-year window is still open. Neon can refer you to specialist leasehold solicitors in East London and Essex and can help manage the block once leaseholders have acquired the freehold.
Talk to Neon about your block →