Qualifying Residential Tenants in Multi-tenancy Disposals

Sophie Bedwell, commercial property lawyer with Clarke Willmott LLP, explains why UK landlords and developers must consider qualifying owners of leasehold flats before disposing of multi-tenancy residential premises.

Landlords of mixed-use residential premises in the United Kingdom need to take account of qualifying tenants in their forward planning prior to disposing of any property.

Disposing of something over which tenants have rights may trigger a Section 5 Notice of the 1987 Landlord and Tenant Act leaving the landlord at risk of criminal prosecution and/or civil proceedings.

The legislation means qualifying owners of leasehold flats have the right of first refusal to purchase the freehold – this means that if the freeholder wishes to sell the building, they must first offer the leaseholders the chance to purchase.

There are practical ways to avoid the 1987 Act, but these require forward planning,” said Sophie who is an associate in Clarke Willmott's commercial property team in Bristol specialising in landlord and tenant work.

The right of first refusal applies where premises consist of the whole or part of a building; contain two or more flats held by qualifying tenants; and the number of flats held by qualifying tenants exceeds 50 per cent of the total number of flats contained in the premises (with some exceptions relating to mixed-use premises).

The Section 5 notice must specify a period of not less than two months from the date of service of the notice within which a requisite majority of the qualifying tenants may accept the offer plus a further two-month period in which to nominate a purchaser.

Avoiding the 1987 Act