Under the Landlords & Tenants Act 1987, protected tenants may have the right of first refusal to buy their flats when a landlord sells.
But the Act is widely ignored because it failed to provide any penalties for landlords who do not comply.
Tenants do have rights under the Act to initiate legal action to force the new landlord to sell for the price at which they bought the flat. This is expensive and does not attract legal aid, so most tenants cannot afford to exercise those rights.
Graham Bruce became a tenant of the Liverpool Victoria Friendly Society in Highgate, London in 1984. The society sold his block of flats in October 1993, four days after it told a rent assessment tribunal that it had no intention of doing so.
The new landlord, Frogmore Estates, then fulfilled its obligations under the Act by offering the properties to the tenants, but at almost twice the valuation the tenants had been advised of two years before. Liverpool Victoria claims substantial improvements were made during that time.
Mr Bruce said: 'Companies that can afford to spend six-figure sums on legal advice, compared with us who can't afford counsel, can exploit the law. They have deprived us of our right to buy.'
Liverpool Victoria defended its behaviour in failing to notify tenants in advance of the sale, despite being required to do so under section five of the Act. A spokeswoman said: 'For commercial reasons the Society elected not to serve notices on the tenants. That in no way deprived the tenants of their rights under the Act.
'The Act specifically contemplates that a landlord might choose not to serve notices on its tenants under section five, and allows for that under sections 11 and 12 of that Act.'
Glenda Jackson, MP for Hampstead and Highgate, says this is a common problem. 'There have been several incidents of tenants having properties sold over their heads and being denied their rights. Tenants often can't afford to protect themselves because they can't afford to go to court.
'The law requires to be changed. If it is happening in my constituency, it must be happening at least in every constituency in London.'
Ms Jackson and others have asked the Department of the Environment to amend the law to create a sanction against landlords that do not fulfil their responsibilities.
When the Bill was first published, officials from Conservative-controlled Westminster City Council warned that unless a penalty was inserted the law would be ignored by most landlords, but the Department of the Environment refused to make changes.
Tenants of another block of flats, also part of the portfolio sold by Liverpool Victoria to Frogmore, are currently involved in a legal action against Frogmore, to try to obtain their rights under sections 11 and 12 of the Act. But the tenants can only afford to take action because it has been financed by another property company which will take over vacant flats if the action is successful.
Housing rights advisers say they receive many complaints about landlords who fail to comply with the law, and Westminster is publishing a booklet to help tenants take action.
Sales of properties to associate companies are exempt from the need to offer flats to tenants, and companies often exploit this by temporarily placing directors of the vendor company on to the board of the purchasing company.
Landlords are being warned that clever avoidance techniques could put them in breach of criminal law.
John Samson, a partner in solicitors Nabarro Nathanson, said: 'There is a distinct danger of committing a criminal offence, and property owners appear, in general, to be far too lax in complying with the legal requirements.'
Landlords should not hide from tenants the fact that a property is being sold, he said, and must ensure that the purchaser sends out notices advising of the sale.
The right of first refusal does not apply to assured shorthold tenants, tenants of local authorities or housing associations, and only applies to tenants of purpose-built flats. More than 50 per cent of the flats must be let to tenants who qualify under the Act, and more than half of those eligible must be in favour of purchasing.
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