Informal Sale of your Freehold Interest

LEASE Law can assist freeholders who are considering negotiating with their tenants for an informal sale of the freehold or are considering selling their freehold interest privately to a third party.

Am I required to negotiate the transfer of the freehold informally to the tenants?

You are not required to informally transfer the freehold to the tenants, however, if you do not agree an informal sale then if the tenants qualify they may serve a formal statutory notice on you as the freeholder to commence the collective enfranchisement procedure and if this notice is valid then you will then be required to transfer the freehold through the statutory process.

Why should I agree to transfer the freehold informally?

If you agree to transfer the freehold informally, the procedure is usually quicker and you will therefore receive the payment in respect of the premium sooner. In addition, as the tenants are usually in a position where they would like to complete quickly, you can often agree a higher premium without paying additional negotiation costs to your valuer. However, we would usually only recommend negotiating an informal transfer of the freehold if the building is small and the premium payable is expected to be low.

What is the cost to me of the informal sale of the freehold?

The tenants will usually accept responsibility for your reasonable costs in connection with the sale of the freehold, which will include your legal costs and valuation costs. You should obtain specific agreement by way of a formal undertaking from the tenants’ solicitor that the tenants will be responsible for your costs before you incur any costs.

How long will it take to transfer the freehold informally?

As the terms of the sale of the freehold are already agreed once we are instructed, if all tenants are participating, it should only take a number of weeks to complete (depending on how responsive the tenant/their solicitors are).

What is the procedure for transferring the freehold informally?

If there are any tenants in the building that do not wish to participate and purchase a share in the freehold interest, the freeholder will be required to serve section 5 notices on all the tenants offering the right of first refusal to buy the freehold interest to all the tenants. The tenants must be given at least two months to decide whether they collectively wish to accept the offer of first refusal. Over 50% of the flats must join together to validly accept the offer, or both flats if there are only two flats in the building.

For more information on the section 5 procedure, please click here.

On the basis that section 5 notices do not need to be served, or that the tenants do not wish to accept the section 5 notices, the participating tenants can proceed with the transaction.

As the terms of the transfer have already been agreed once your solicitor is instructed, we will investigate your title to the subject property, draft the Transfer Deed for the approval of the tenant’s solicitor, deal with any mortgage over the freehold title and negotiate the terms of the draft Transfer Deed until it is in agreed form.

Once the Transfer Deed is in agreed form, the transfer will need to be signed on behalf of both parties. Once these formalities have been carried out, the premium and costs will be paid by the tenants’ solicitors and the transfer will be completed.

How can LEASE Law help me?

LEASE Law are specialist solicitors who can act on your behalf in respect of the legal requirements to transfer the freehold to your tenants. LEASE Law will advise you in respect of their legal costs and expected disbursements at the outset and seek to recover their fees from the tenants (unless you have agreed otherwise with the tenants).

We can recommend specialist enfranchisement valuers who have extensive experience and expertise in this area to ensure that the premium that you receive for the freehold interest is as high as possible. Your valuer will provide you with an initial report which will advise you on the premium that you should offer to the tenants.

If you would like LEASE Law to assist you with a potential informal sale of your freehold interest, please contact Jade Wilson (jade@leaselaw.co.uk or 0204 511 9100) or Joanna Botley (joanna@leaselaw.co.uk or 0204 511 9101) for a no obligation discussion.