Section 5 notice: what it means and what leaseholders should do

A section 5 offer notice means the landlord is proposing to sell the freehold (or part of it) or superior lease, and qualifying leaseholders must be offered the opportunity to buy it first.

Handled correctly, a section 5 notice can present a genuine opportunity for leaseholders. Handled late or without coordination, it can just as easily result in rights being lost by default. Understanding what the notice does, what it does not do, and what steps should be taken early on is key.

What a section 5 notice means

A section 5 notice is served under the Landlord and Tenant Act 1987 when a landlord intends to sell all or part of the freehold or superior lease of a building containing flats, and the right of first refusal applies.

The notice sets out the proposed sale terms (or details of a planned auction) and gives qualifying leaseholders the chance to purchase the building on the same terms before it is sold to a third party. It does not mean the sale has already happened, but it does start a statutory process with strict deadlines that leave little room for delay.

Whether the landlord must sell to leaseholders

The right of first refusal gives leaseholders the opportunity to buy, not an automatic right to prevent a sale. The landlord is only required to sell to leaseholders if the offer set out in the section 5 notice is accepted within the required time.

If the offer is not accepted, the landlord may proceed with a sale to a third party, provided the sale is not on better terms. In practice, this means that doing nothing is itself a decision — one that can have long-term consequences for leaseholders.

Why timing is critical

Time limits under the right of first refusal are fixed by statute (unless the parties agree to an extension of the statutory deadline). In most cases, leaseholders have two months from service of the section 5 notice to accept the offer. If the offer is accepted, further statutory steps and deadlines apply before the transaction can proceed.

Although two months can sound generous, coordination takes time. Leaseholders need to identify who qualifies, decide whether there is sufficient support to proceed (there must be a majority of qualifying tenants who take part) and consider funding and structure. Leaving these discussions too late is one of the most common reasons opportunities are missed.

What leaseholders should do first

The initial focus should be on organisation rather than negotiation. Leaseholders should urgently seek advice from a specialist solicitor who can check whether the building and tenants qualify, identify and contact other leaseholders, and confirm when the notice was validly served and when deadlines expire.

It is also important not to assume that someone else is dealing with the process. Managing agents, directors or individual leaseholders may all assume responsibility lies elsewhere. Where no one takes the lead early on, rights can be lost simply through inaction.

Price and negotiation

The right of first refusal does not include a statutory mechanism for negotiating the price or other sale terms. The landlord is not obliged to negotiate, and if the landlord does agree to change the terms, a new section 5 notice will usually need to be served, restarting the process.

This rigidity can be an important factor when leaseholders are deciding how to proceed.

Understanding this early can help avoid wasted time and allow more informed decisions to be made.

What happens if leaseholders do nothing

If the offer is not accepted within the statutory time limits, the landlord may sell the building to a third party, provided the sale is not on better terms . Once that happens, the opportunity to purchase under the right of first refusal is usually lost.

In some cases, leaseholders only realise the significance of a section 5 notice after a sale has completed. By then, options are often more limited, more expensive, and more contentious, with only the collective enfranchisement option available.

Guidance from our leasehold and enfranchisement solicitors

A section 5 notice is technical and unforgiving. Understanding whether the notice is valid, whether the right of first refusal applies, and what options are realistically available can make a material difference to the outcome.

Jennifer Slater, leasehold and enfranchisement solicitor, comments:

“We often see leaseholders receive a section 5 notice and assume there is plenty of time to decide what to do. In reality, deadlines are fixed, and coordination takes time. If solicitors are instructed too late, it can be difficult to meet the deadline for serving an acceptance notice. Early advice can help leaseholders understand their options properly before rights are lost or positions become fixed.”

Our leasehold and enfranchisement solicitors advise leaseholders, landlords and purchasers on right of first refusal matters and regularly support clients at an early stage, where clear advice can prevent unnecessary disputes and missed opportunities.

For advice on a section 5 notice or the right of first refusal, speak to our leasehold and enfranchisement solicitors.