What To Do When your Landlord decides to Sell the Freehold
You just received a letter stating that your landlord is serving a Section 5 Notice, also known as an offer notice, and intends to sell the freehold of your property. Facing this scenario can be overwhelming, but understanding your rights and the next steps will empower you and other qualifying tenants to make well-informed decisions.
Don’t panic. This article covers everything you need to know if your landlord decides to sell the freehold of your building. Inside, you’ll find step-by-step advice on Section 5 Notices, the right of first refusal, how to organise a collective freehold purchase, the financial and legal implications, tips for navigating deadlines, and links to essential resources for leaseholders facing this situation.
What is a Section 5 Notice?
A Section 5 Notice is a legal document served by the landlord to qualifying tenants—residential leaseholders in a building—to inform them of an intention to sell the freehold interest.
This requirement comes from the Landlord and Tenant Act 1987, which imposes legal duties on landlords to give leaseholders the right of first refusal before any sale to a third party. Failing to serve a Section 5 Notice is a criminal offence under UK law.
There are several types of Section 5 Notices (including 5a, 5b, 5c, and 5d), each addressing different sale scenarios such as private treaty or public auction. Regardless of type, the notice period must provide at least two months for leaseholders to respond—giving you time to organise and assess the proposed price and terms.
Occasionally, if the sale is to be made at auction, leaseholders must be notified of the auction date.
Learn more about the collective enfranchisement process and statutory requirements in our step-by-step guide to collective freehold purchase.
Landlord Selling Freehold: What It Means For Leaseholders
When a landlord decides to sell the freehold property of a building, it represents a pivotal moment for leaseholders. The sale of the freehold interest does not just change building ownership—it can impact everything from ground rent obligations to future management and investment in the property.
Compare your options in our deep dive on freehold vs. share of freehold ownership.
Greater Control or Increased Uncertainty
If qualifying tenants choose to purchase the freehold, they become collective freehold owners, giving them direct control over property management, maintenance priorities, and decisions regarding lease extensions or alterations. This transition empowers leaseholders to eliminate escalating ground rent, modernise lease terms, and ensure the building is managed in a way that best serves their interests.
However, if leaseholders decide not to act on their right of first refusal, the freehold may be transferred to a new owner with their own priorities. A new freeholder can change policies, collect higher service charges, or take a stricter stance on permissions and lease variations. This uncertainty is particularly relevant for leaseholders who have long leases as their only or principal residence, since future leasehold reform may further affect their rights.
Financial and Legal Implications
Purchasing the freehold requires coordination and usually the formation of a limited company to act as nominee purchaser. The purchase price offered in the Section 5 Notice becomes a benchmark. Leaseholders must evaluate whether the proposed price is fair, considering factors like the remaining lease lengths and the value of future ground rent streams.
A landlord selling the freehold also triggers statutory protections under the Landlord and Tenant Act, which obliges the outgoing owner to offer the same terms to leaseholders as to any private buyer or entity. Failure to follow this legal process can result in penalties and, in some cases, reversal of the sale.
For an estimated cost and to understand your outlay, use our Freehold Purchase Calculator for a preliminary estimate.
Long-term Value and Security
Owning the freehold can significantly increase the value and saleability of individual flats. Prospective buyers and mortgage lenders often prefer properties where leaseholders collectively own the freehold interest, as there is a reduced risk of disputes over management or unreasonable costs imposed by an absentee landlord.
For many, the landlord selling the freehold is a crucial opportunity to invest in the long-term security, value, and autonomy of their home. Whether or not to proceed is not just a financial calculation, but a decision about the future relationship with the property and fellow residents.
Who Are Qualifying Tenants and Eligible Leaseholders?
To participate in purchasing the freehold, at least half of the flats in your building must be occupied by qualifying tenants—residents with leases longer than 21 years as their only or principal residence, and not holding periodic tenancies or assured tenancies. The same requirements apply to qualifying leaseholders, who must collectively serve an acceptance notice before the deadline.
Some situations are excluded, such as properties owned by social landlords, charitable housing trusts, or where the immediate landlord genuinely lives in the building as their principal residence and manages at least two flats (known as resident landlords). This exemption does not apply to purpose-built or converted house blocks predominantly for non-residential use.
Understanding Your Right of First Refusal
The right of first refusal means current leaseholders have the opportunity to buy the freehold on the same terms before the landlord offers it to the open market. Unlike a standard Collective Enfranchisement claim, this take-it-or-leave-it offer means that you do not need to haggle over the price.
This unique chance often arises only once during your tenure, and missing it can result in losing control over ground rent, lease terms, and building management to a potentially less cooperative new owner or housing authorities.
A Section 5 offer notice will include the proposed price for the freehold interest, terms of sale, and a deadline (the acceptance date) by which you and other leaseholders must serve notice if you intend to accept.
If you agree, at least 51% of eligible tenants must act together, usually through a nominated person or by forming a private limited company, to serve the acceptance notice. Existing leaseholders must be named, and all legal documents must be properly completed and submitted in time.
The Leaseholder’s Process: Step-by-Step Guidance
Exercising your right of first refusal under the Landlord and Tenant Act 1987 requires careful coordination:
- Gather volunteers among flat owners to coordinate efforts
- Confirm you have at least two flats
- Organise eligible tenants and assess the potential purchase, carefully reviewing the purchase price and any obligations outlined in the formal offer notice
- Consult a qualified surveyor to establish if the freehold price reflects market value
- Secure agreement on the funding structure, potentially involving all interested parties who are current leaseholders
- Nominate a purchaser—usually a newly formed limited company—to represent leaseholders in the transaction
- Serve the acceptance notice on the freeholder ahead of the set deadline
If leaseholders accept, you must enter into a signed contract, raising and transferring all funds by the specified completion date.
A comprehensive breakdown of roles, documentation, and timelines is detailed in our collective enfranchisement guide.
Key Challenges and Possible Sale Issues
The process can feel daunting due to the tight time frame, imposed legal duties, and need for consensus among your group. Cohesion and organisation are critical—appointing a lead contact, making quick funding decisions, and ensuring all documents are correctly handled.
If the offer price is not acceptable, leaseholders may seek guidance from a qualified surveyor or engage the First-Tier Property Tribunal to resolve disputes, though this is usually rare in right of first refusal cases.
Key responsibilities (and challenges without a project manager) include:
- Identify volunteers to lead the process
- Recruit at least 50% of the apartment owners in your building to collaborate
- Decide on the financial merit of purchasing the freehold at the given offer price
- Agree on the funding structure
- Nominate or create a purchaser (often a limited company)
All before officially accepting the offer in the correct legal form. And you have 2 months or less to do all that. Then, of course, you need to collect the funds and complete the transaction.
This is where project management becomes crucial.
Expert Help and Additional Considerations
Specialist solicitors and property consultants offer expert guidance in collective freehold enfranchisement and can handle the conveyancing, land registry filings, and compliance with the required legal offer process. Professionals can help you negotiate new leases, modernise your building’s management, and rectify restrictive ground rent clauses or outdated provisions.
Remember to:
- Examine the formal offer notice and ground rent provisions closely
- Check for clarity on the final selling price and same terms offered to external buyers
- Ensure all individual flats and qualifying leaseholders are identified correctly
- Use legal advisors with experience in collective enfranchisement and resident landlord legislation
This is a rare and valuable opportunity to take control over freehold ownership, improve your building, and secure the long-term value of your homes.
Comparing Leaseholder Outcomes: Buying the Freehold vs Letting It Be Sold
| Aspect | Leaseholders Buy Freehold | Freehold Sold to New Landlord |
| Ground Rent Control | Can eliminate or fix future ground rent for all flats | New freeholder may enforce ground rent provisions |
| Building Management | Full control as collective owners; can appoint managing agent or self-manage | Dependent on new owner’s approach; potential for increased charges |
| Lease Extension | Can grant themselves new, longer leases at minimal cost | Must negotiate and possibly pay premium to new freeholder |
| Improvement Decisions | Leaseholders prioritise works, repairs, and upgrades | New landlord controls priorities; leaseholders have less say |
| Legal Protections | Direct access to legal documents; easier to resolve disputes internally | Risk of stricter enforcement of lease terms; may need tribunal for disputes |
| Saleability and Value of Flat | Generally improved; more attractive to buyers and lenders | Value may fall if new terms are unfavorable or disputes increase |
| Responsiveness to Issues | Residents can act quickly through their committee | Delays possible; depends on responsiveness of new freeholder |
| Future Security | Stable long-term environment; able to modernize leases | Subject to decisions of new landlord, who can sell again |
This comparison table helps illustrate the practical benefits—and risks—of choosing to collectively buy your building’s freehold interest versus allowing an external buyer to become the new freeholder.
Ready to act on your right of first refusal?
Take the next step to secure your future by responding to your offer notice before the deadline, and transform your experience as a leaseholder today.
Contact our team for a free consultation. We’ll review your Land Registry details and outline your best options at every step.
Related Resources & Next Steps
- Purchase Your Freehold: In-depth overview of the purchase process.
- Right To Manage: Alternative pathway if acquisition is not possible.
- Commonhold Services: For those interested in transitioning to full collective ownership.