If you would like us to quote a purchase price for a portfolio, please send brief details of the portfolio (e.g. rent per annum, number of properties, length of lease, location) to:-
Compton Group
PO Box 425
Swansea
SA6 8YH
Alternatively please ring:-
Peter Burgess (Group Solicitor) 01792 315459
David Thomas 01792 315476
Trevor Toghill 01792 315458 |
|
_______________________________________________________________________________________________________
Flats – advance purchase agreement
 |
With the growth in the number of flats being developed, an increasing number of developers are having to consider how to deal with the freehold reversions, following the grant of leases of the individual flats.
The new alternative tenure of “commonhold” is proving slow to catch on. The tried and tested 99 or 125 year lease is still the preferred way of developing blocks of flats. The major difficulty with selling flats on a leasehold basis is that, when a developer wants to dispose of the freehold after the flats have been sold, the freehold must first be offered to the lessees in accordance with section 5 of The Landlord & Tenant Act 1987. This involves a cumbersome process of serving notices and then waiting for a statutory period of two months for the lessees’ response. Added to all this is the draconian sanction of a criminal offence if the statutory procedure is not strictly adhered to. |
However, there appears to be a way to avoid the need for Section 5 notices – by entering into an advance purchase agreement. Provided the advance purchase agreement is concluded before any of the individual residential units are sold, then no offence is committed under the 1987 Act. This is because at the point in time the advance purchase agreement is concluded, there are no qualifying lessees who can be served with a section 5 notice.
The basis of the advance purchase agreement is usually that an unconditional contract is entered into between the developer of the site and the prospective purchaser of the freehold reversions before any of the residential units are sold and under the terms of that contract, the developer retains the power to sell the residential units (and generally to carry out the development). Once the last of the residential units has been sold, the developer serves a completion notice under the advance purchase agreement and completion of the sale of the freehold reversion takes place 21 or 28 days later.
Also, since all sorts of things can change or go wrong in the course of a development, it is prudent to include in an advance purchase agreement a long stop provision to the effect that if the agreement is not performed within, say, three years, then either party can terminate it.
We have acquired ground rent portfolios from a number of the country’s leading house builders and have concluded many advance purchase agreements for blocks of flats on new developments.
We have an in‑house legal team who can undertake all the legal work at no cost to the vendor. If you are interested in disposing of new flats under an advance purchase agreement, we can send you a specimen agreement.
_______________________________________________________________________________________________________
Flats – section 5 notices
 |
If you have already sold the flats, it will be necessary to serve section 5 notices on the qualifying lessees. We can prepare the notices for you to send out. The notices offer the lessees the right of pre‑emption i.e. they can buy the freehold on the same terms. You have to allow the lessees a period of two months before the sale of the freehold to us proceeds. If a majority of the qualifying lessees elects to buy, you have to sell to them on the same terms as you would have sold to us. It is unusual for lessees to accept, especially in the case of larger, more modern blocks. |
_________________________________________________________________________________________________________
|
