As many of you will know, right of first refusal notices need to be given to flat owners in certain circumstances when their landlord wishes to make a disposal of the freehold of their building or another relevant interest in it.
Those of us who have been around as long as Albus Dumbledore are more than used to dealing with the idiosyncrasies of the Landlord and Tenant Act 1987 which introduced this obligation and which is often more honoured in the breach.
The landscape has now changed and the process, which like Severus Snape, was a necessary evil, has become more sinister. Blatant disregard of the Act has long been a criminal offence, but enforcement was very unusual. Not so anymore, this writer is aware of one case where a local authority took action against a landlord who sold a building at auction because, in the local authority’s view, the Act had not been properly complied with.
Inexperienced or cavalier muggles who may view the format of the notices with disdain risk exposing their clients to prosecution and the sale proceeds being treated as the proceeds of a crime. Closer to home, failure to comply also risks exposing their firms to a compliance issue or themselves or members of their firm to a trip to Azkaban!
Further confusion has been added by the recent case of SGL 1 Ltd v FSV Freeholders Ltd which, having been overturned on appeal, gives no more certainty on when a building is a building. Whilst the appeal decision did provide some help in confirming that:
- a building is likely to be a built envelope and not a building scheme; and
- that it is within the gift of the landlord making the disposal to decide which parts of the common parts of the estate it wishes to dispose of
The question of whether an estate on which multiple buildings share common facilities (sadly not the Leaky Cauldron) more likely estate roads and bin stores, can be treated as one building when serving right of first refusal notices remains an enigma.
However, the Act is not all doom and gloom. Used properly, it allows landlords to offload their interests in buildings containing flats on a “take it or leave it” basis without the bother of responding to pesky pre-contract enquiries and using a form of contract with which they are familiar.
For flat owners, the Act does not allow the landlord to recover its legal costs of dealing with the disposal from the flat owners and, the flat owners are against the clock to accept the offer and get on with exchanging and completing on the purchase.
A fellow wizard and expert in the mysteries of valuation, Mark Wilson of Myleasehold, is of the view that the notices are in fact an invitation to treat, much like an owl rather than a howler and an opportunity for landlords and flat owners to come to terms regarding the transfer of the freehold (or other interest in the building) which benefit both parties. Providing an exit for the landlord and, in the case of the disposal of the freehold of the building, an opportunity for the flat owners to take control of their building without the costly hassle of a collective enfranchisement.
Whilst this area of property law is arguably overdue for an update, the government has chosen not to use its “expelliarmus” spell on this part of the Act and to focus its attention on more crowd pleasing changes such as revitalising commonhold and the ban on new leasehold flats and so we will all have to struggle on with our own dark arts for now.