Apr 042015
 

As an introduction to this, I'm writing this from the point of view of a freeholder wishing to evade the right of first refusal but for the record this is more or less what happened to me as a flat leaseholder. Obviously certain details have been changed and the relevant names left out.

One of the things they don't say when someone buys a leasehold flat is that when the freehold changes hands, the leaseholder should normally have the right of first refusal. The existing (and prospective) freeholder should formally notify the relevant leaseholders that the freehold is due to change hands, and offer the freehold on exactly the same terms.

There are certain exceptions to this right of first refusal which can be basically summed up as various forms of inheritance, so probably won't be of much use in helping out.

The first decision to make – long before the freehold changes hands – is whether it is worth defending. If the freehold is purely residential it is probably not worthwhile trying to defend it, and some of the options below are not available. If however there is commercial element to the freehold such as the shops in a mixed use block, then it is may well be worth defending. 

You can of course split off the valuable part of the freehold into a leasehold so that the freehold becomes a lot less valuable; even if you do lose it, you still retain the commercial and profitable part of the property. It also allows you to 'fiddle" the price of the freehold so that when you sell the freehold and the leasehold together, you charge far more for the freehold than it is actually worth.

And don't tell the leaseholders about their right of first refusal. Sure that's illegal, but it turns out nobody really cares about that. Most leaseholders won't be aware of their right of first refusal, and even if they are aware, they will be too concerned with the expense to take it any further. Unless you have managed to annoy them in some way.

And whilst you are ignoring the right of the leaseholders to be informed of their right of first refusal, you can keep yourself busy by merging the previous leasehold of shops with the freehold. Making a fundamental change to the value of the freehold will complicate the right of first refusal if it ever comes up.

If the leaseholders do make an attempt at enforcing their right of first refusal, delay at every opportunity. Unless you give up at the first hurdle, the issue is going to court and any court action is a game of chicken where the loser is the first to blink at the escalating legal costs.

As usual, justice in this country favours the rich.