A section 5A notice (“Section 5 Notice”) is served on leaseholders when the landlord intends to sell the freehold.

The Landlord and Tenant Act 1987 obliges the landlord to offer to tenants of qualifying buildings the right to acquire the freehold when the landlord decides to sell. Under the 1987 Act the freeholder (or another landlord) who wishes to dispose of an interest in a block of flats is obliged to first serve Section 5 Notice on qualifying leaseholders prior to any disposal, giving them the opportunity to buy that interest on the terms set out in the notice, allowing the tenants two months in which to accept the offer. This is known as the Right of First Refusal.

N.B. -You should refer to the Section 5 Notice in order to establish the date for acceptance. Your landlord must give you at least 2 months to respond.  This neither obliges the landlord nor the tenant to proceed.  

Section 5 Notice must to be sent to the leaseholders setting out certain information about the sale, including the price at which the freeholder wishes to sell, and other terms. If a majority (at least 51%) of the leaseholders wish to acquire the freehold on those terms, those 51% of the tenants in a building must accept the offer. This does not mean that those 51% need to provide the funding as that can be provided by the remaining tenants or even outside the group. A valid acceptance notice has to be collectively served by the requisite majority of the qualifying tenants, this is 51% of the flats which are held by qualifying tenants. The leaseholders accepting must nominate a purchaser. This could be a company that they form to take over ownership of the freehold. Having accepted the offer, tenants then have two months in which to nominate the purchaser and then in effect, a further month in which to complete the purchase.

If a valid acceptance notice is not served or is served late, the freeholder is free to sell the freehold to anyone else within the following 12 months, provided that the terms are no less favourable than those set out in the Section 5 Notice.

If the freeholder fails to comply with his obligations to offer the leaseholders the Right of First Refusal and sells to a third party, the freeholder commits a criminal offence. In addition, the leaseholders have the right to acquire the freehold in these circumstances from the third party who bought it, on the same terms.

This Section 5A Notice template shall be used to comply with the right to first refusal, as there is a legal obligation on landlords to serve the notice to purchase the freehold on leaseholders before they sell on the open market.

This Section 5A Notice template is in Microsoft Word format, written in plain English, easy to use and edit.