How to sell a freehold, a guide for freeholders

Selling the freehold of a block of flats can seem complicated. This guide breaks down how to sell a freehold and explains what a section 5 notices is. We also look at how much you can sell a freehold for, and clarify how a freeholder can sell a freehold in different situations.

Can a freeholder sell a freehold? How does it work?

Yes, generally, as the owner of the freehold, you absolutely can a freeholder sell it and you have the right to decide when and at what price. However, there are important legal considerations, particularly concerning the rights of your leaseholders, that you must be aware of. These rights can sometimes influence how to sell a freehold and who you can sell it to.

How to sell a freehold

If you decide you want to sell your freehold, you have several avenues to explore:

• Direct Sale: You can market the freehold an agent who will offer the investment to a pool of buyers that are interested in ground rent investments. They will help you find potential buyers, negotiate offers, and manage the sale process alongside a leasehold solicitor who completes the formalities

• Approach the leaseholders: As those living in the building, you are likely to find that the leaseholders are interested in upgrading their leasehold ownership to share of freehold with a 999 year lease at a peppercorn rent, and you are free to agree a price between you before appointing solicitors to handle the paperwork.

Before you put your freehold on the open market, you must consider the right of first refusal.

You must be aware of the leaseholders right of first refusal

The leaseholders might have the right of first refusal. This means you are legally obligated to offer them the opportunity to purchase the freehold before you can sell it to anyone else on the open market. This is known as the section 5 notice procedure, which you can read more about here.

If the building contains flats held on long leases, it will usually be caught by the need to serve section 5 notices on the leaseholders, though specific advice is needed in each case as there are some exemptions.

How much can you sell a freehold for

It's crucial to set a realistic and market-related price in your offer notice. If the leaseholders decline your offer, you cannot sell the freehold to a third party for a lower price without going back to the leaseholders to offer that lower price to them first.

You will therefore need to be realistic as there is little good in serving section 5 notices at a high desirable price only to see it ignored, and to then find that ground rent investors are also not interested at that price point.

We recommend speaking to an agent first and finding out the sort of price that could be achieved on the open market (considering the leasehold reforms underway in 2025, this tends to be a multiplier of ground rent, perhaps 20 x the annual ground rent, and the market is pricing freeholds without marriage value in anticipation of it being abolished).

The consequences of not serving a section 5 notice under the right of first refusal

Failing to offer the freehold to the leaseholders is a criminal offence and it is highly likely that the flat owners will notice the change in ownership and become aware of this.

In addition, the leaseholders may have the right to force the new freeholder to sell the freehold to them at the same price the new freeholder paid. This can be a disaster if the freehold has for example been transferred for £1 to a friendly party; the leaseholders could then (and there is a precedent for this exact thing) buy the freehold for £1 from the new owner or obtain a court order forcing the sale if the new freeholder doesn't co-operate.

It is therefore extremely important to take advice from an experienced leasehold solicitor.

Other considerations

It is worth bearing in mind that as freeholder, you are always open to a collective enfranchisement claim, whereby the leaseholders take the initiative to buy the freehold rather than you offering to sell it voluntarily.

Leasehold solicitor Ricky Coleman, based in Brighton, argues that "from a freeholder perspective, the price payable under a collective enfranchisement claim is likely to be higher than the price you would to an investor for on the open market. This is due to there being a very specific form of valuation for collective enfranchisement claims, whereas freehold sales on the open market are as simple as 'what is someone willing to pay', whether this be an investor or a group of leaseholders that didn't plan on the outlay of buying a share of freehold, but may be tempted at the right price."

How to sell your freehold, by making informed decisions following legal advice

Whether you are proactively looking at how to sell a freehold on the open market or offering it informally to the flat owners, seeking specialist legal advice is absolutely essential. A solicitor experienced in freehold sales and leasehold enfranchisement can:

• Advise you on whether the right of first refusal applies and guide you through the correct procedures.

• prepare the section 5 notice and serve it in accordance with legal requirements

• prepare the sale contract and freehold transfer deed

• ensure an orderly handover on completion

Given the complexities of leasehold law, and fairly hefty consequences of getting this wrong, it is essential to treat this much like you would treat the sale of your family home, using a specialist property solicitor.