Serving a Section 6 Notice: Landlord and Tenant

Section 6 Notice: Landlord and Tenant

If you’ve been served with a section 5 notice by your landlord, you could have the opportunity to buy your building’s freehold by serving a section 6 notice on your landlord in response – however, you must be careful to adhere to the statutory requirements or else risk losing the opportunity to purchase your freehold entirely. If you’re a landlord considering selling your freehold interest, click here for our blog on section 5 notices for landlords.

What is a Section 5 Notice?

A Section 5 Notice indicates that your Landlord wants to sell the freehold title of the building. Under Section 5 of the Landlord and Tenant Act 1987, the Landlord is obligated to give all eligible leaseholders in the property Right of First Refusal if the building qualifies – that is, the Landlord cannot sell the freehold interest to anyone else if the building meets certain criteria unless they’ve offered it to the leaseholders first. In most cases, the landlord will have served a Section 5a notice. The Section 5 Notice should have been served on all eligible leaseholders within your building and should contain:

• The freehold interest being sold
• The terms of the sale
• The non-negotiable price at which the property is to be sold
• A timeframe in which you much respond (note that this must be at least two months from the date the Notice is served)
• A timeframe in which the leaseholders should nominate a purchaser to complete the transaction (note that this must also be a further two months)

Alternatively, if your landlord has served a section 5b notice on you, this means they intend to sell their freehold interest at an auction. They should serve notice on you at least 4 months before the auction is to take place and their notice should also include (along with the above):

• The timeframe in which the lessees must accept the opportunity to bid – this will usually be at least 2 months before the auction date)
• Confirmation that the freehold interest is to be sold at a public auction

The landlord isn’t obligated to include the date of the auction in the Section 5b notice, but if they don’t, they must serve another notice on the tenants with the date, time and location of the auction at least 28 days in advance.

What is share of freehold property?

If you and the other leaseholders purchase the freehold, you will each own a share of the freehold property. Despite what the name suggests, this means you will own two separate legal entities: your leasehold flat (that you already own), plus a share in the freehold. Many freeholders choose to create a limited company, then transfer the freehold interest into the limited company’s name; the co-freeholders will instead then each own shares in the limited company that owns the freehold. Owning the freehold through a limited company can have a number of benefits, such as being able to transfer shares between sellers and buyers more easily and to implement guidelines relating to delegation of responsibilities, decision-making and dispute resolution.

What are the benefits of owning the freehold?

There are a number of reasons why owning your property’s freehold could be advantageous. The main benefit is the ability to extend your lease cheaply; when you own a share of the freehold, you can make an agreement with your co-freeholders to charge no premium for lease extensions and to allow you to extend your lease by up to 999 years. Find out more in our blog post about lease extensions for share of freehold property. Another benefit is the ability to control your building’s maintenance and insurance. Instead of paying a service charge to your landlord, you and your co-freeholders can organise maintenance and insurance yourself meaning you can select the best deals on your insurance and choose when maintenance is performed.

Do I have right of first refusal?

Your landlord will have to give you right of first refusal if:

• The building contains at least two flats
• At least 75% of the units in the building are being used for residential purposes
• At least two-thirds of the lessees in the building are eligible (lessees must have at least 21 years remaining on their lease and own no more than three flats in the building to be considered eligible)

What should I do if my landlord has served a section 5 notice on me?

If you’re not interested in purchasing the freehold, you won’t need to do anything. Once the period of time within which to give notice has elapsed, your landlord will then be able to sell their freehold interest to someone else – though they cannot sell the freehold to anyone else for a lower price or on different terms than they offered you for at least 12 months after the leaseholders have refused. If however you are interested in purchasing the freehold, you’ll need to serve a section 6 notice on your landlord. Simply telling your landlord you’re accepting the offer isn’t enough – you need to have served the section 6 notice on your landlord by the deadline listed on the section 5 notice you will have received.

What should I include on my Section 6 Notice?

The section 6 notice needs to include:

• The current date on which the notice is being served
• Confirmation that you and the other tenants intend to accept the offer
• The address of the freehold property that is being purchased
• The name and address of the nominated purchaser, as well as confirmation that they have been nominated
• Names and addresses of every tenant who has agreed to purchase the freehold
• A signature from the person acting on behalf of the tenants.

How do I buy my freehold with a section 6 notice?

Here’s a breakdown of the process of buying your freehold depending if you’ve been served a section 5a or 5b notice.

If you’ve been served a section 5a notice

1. Speak to the other leaseholders – You’ll need to speak to your fellow lessees to see if they would be interested in buying the freehold with you. At least 50% of the households within the building must agree to purchase the freehold. If your building consists of just two flats, both households will need to agree.
2. Nominate someone to be in charge of the purchase – Ideally this will be someone who has the most experience and/or someone who has the most free time to ensure all the paperwork is done on time, but any leaseholders who are purchasing the freehold can be nominated.
3. Serve a Section 6 notice on your landlord Make sure your Section 6 contains everything it needs to include as explained earlier in this blog post. Ideally, you should serve notice by posting the notice to your landlord’s address by recorded delivery, although some landlords will accept service by email.
4. Exchange contracts and pay the deposit (if applicable) – You will need a solicitor to draft the contracts and, following completion, to register the transfer of the freehold with the land registry.
5. Exchange monies and Complete on the sale.

If you’ve been served a section 5b purchase (auction purchases)

1. Speak to the other leaseholders
2. Nominate someone to be in charge of the purchase.
3. Serve a section 6 notice onto the freeholder – The requirements for the section 6 notice will be the same as if you’d been served with a section 5a notice. By serving the section 6 notice, you reserve your right to buy the freeholder at the price offered by the highest bidder. If you choose not to pay the price the highest bidder offered, your landlord will be able to sell the freehold to the bidder instead.
4. Decide whether to purchase following the auction – If you decide not to pay the price the winning bidder was willing to pay for the freehold, the freeholder is free to sell the freehold to the winning bidder. However, if you do, you will need to notify the freeholder of your intention to purchase the freehold at that price.
5. Exchange contracts and pay the deposit – Your freeholder will then have 7 days to send the nominated representative of the leaseholders a contract of sale, which the purchasing leaseholders will then have to sign and return within 28 days. You will also need to pay the deposit, which is generally 10% of the full price.

How much will it cost to buy my freehold?

Your freeholder should include the price at which the freehold is being sold on their section 5a notice. If you’ve been served a 5b notice, it will depend on the highest bid offered. Other than the price, the other central cost in purchasing your freehold will be the legal fees. Our solicitors offer high-quality, comprehensive legal services refined by over 10 years’ experience in conveyancing – get in touch today for an instant online conveyancing quote.

Can a landlord withdraw a section 5 notice once it’s been served?

Usually, a landlord cannot withdraw a section 5 notice once it’s been served and before it has been accepted, unless the leaseholders haven’t accepted the offer within the timeframe specified on the notice.

Can I force the landlord to sell the freehold?

Through a process called Collective Enfranchisement, eligible leaseholders can force their landlord to sell the freehold of their building to them, by serving a notice onto your freeholder. However, if you want to force your landlord to sell the freehold title to you, you and your fellow leaseholders will need to fit certain criteria. At least two-thirds of the building must be owned by eligible leaseholders (those who own less than 3 flats in the building and have at least 21 years remaining on their lease), and at least half of the eligible lessees in the building must agree to purchase the freehold with you. You can find out more about this process in our dedicated blog post titled Can I buy the Freehold of my Flat?

How Starck Uberoi Solicitors can help

As specialist leasehold solicitors, we have helped numerous leaseholders with their purchase of the freehold. We have Law Society Accreditation under the Conveyancing Quality Scheme (CQS) in recognition of the excellent standard of conveyancing service we offer. We take a client-focused approach dedicated to making the conveyancing process as quick and easy as possible, such as by using the Starck Uberoi app and offering a comprehensive no-obligation instant online conveyancing quote for our clients’ convenience. We are also trusted conveyancers on the lender panels for the majority of high street lenders including Barclays, Halifax, HSBC, Nationwide, NatWest and Santander. To book an appointment, please call 020 8840 6640 email solicitor@starckuberoi.co.uk. You will find our solicitors on Brentford High Street, our solicitors on St Mary’s Road in Ealing, our solicitors in Grosvenor Gardens, our solicitors on Pinner High Street, our solicitors on Richmond Green and our solicitors in The Precincts, Canterbury. Our partner, Raminder Uberoi, can also provide a Notary Public Service at any of our London offices.