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Leasehold Extension – Getting Started

An outline of the right to extend the lease of a flat under the Leasehold Reform Housing and Urban Development Act 1993.

The right to extend the lease of a flat under the Leasehold Reform Housing and Urban Development Act 1993.

Introduction

This leaflet is not meant to describe or give a full interpretation of the law, as only the courts can do that. And it does not cover every case. One of the drawbacks of owning a flat or maisonette on a long lease is that it reduces in value over time. The less time is left on the lease, the less valuable the property becomes. Because of this, the law gives the leaseholder ( tenant ) the right to extend their lease once they have owned it for two years.

The right is to add 90 years to what is left on the existing lease at a ‘peppercorn rent’. A peppercorn rent means that no ground rent is paid. For example, if the present lease had 70 years left to run, the new extended lease would be for 160 years.

The landlord is entitled to a premium (the price) for extending the lease, and this is based on a formula set out in the Leasehold Reform Housing and Urban Development Act 1993 (the 1993 act), as amended by any future acts that apply.

This advice guide explains your legal right to extend your lease. If you prefer, it may be possible to negotiate a lease extension with your landlord on whatever terms you can agree. If you decide to try to negotiate a lease extension, there are no rules and your landlord could refuse to extend your lease, or set whatever terms they like. For example, they may want to increase the ground rent as one of the terms.

Download a template informal letter enquiring about lease extension of a flat, or to purchase the freehold of a house or flat

If you are not able to agree a lease extension with your landlord, you would need to go down the statutory route that is the subject of this guide.

The formal procedure is started by the service of the Tenant ’s Notice on the landlord (the Tenant’s Notice) and it then follows a prescribed route. Although this is the beginning of the formal process for acquiring the ninety year extension, it should follow a period of preparation to ensure that you are fully equipped and advised to complete the acquisition.

Before you start the procedure, you need to:

• check you are eligible (including by identifying the ‘competent landlord’);
• choose and instruct professional advisers (that is, a surveyor and a solicitor );
• assess the premium;
• make sure you have the money you will need to complete the procedure;
• gather the information you will need;
• prepare the tenant’s notice; and
• prepare for the subsequent procedures.

While the order in which you do the above tasks is a matter for you and your advisers to decide, you will need to have done them all before starting the procedure. Once you have served the tenant’s notice, the procedure will be running and you will be asked to provide information and meet deadlines. If you fail to do any of these things when asked, your application to extend the lease could be unsuccessful. You will be liable for the landlord’s reasonable, professional fees from the date you serve the tenant’s notice, whether or not your application is successful. The act states what costs the landlord can recover, and gives some guidance as to what is reasonable. (See section 60 of the act.)

Remember that if you apply to extend the lease, your application will be suspended if the other leasehold ers make a joint application to buy the freehold using the collective enfranchisement procedure set out by the 1993 act. Similarly, you cannot apply to extend your lease while an application for collective enfranchisement is being considered.

Checking eligibility and starting the process

Qualification.

Qualifying as a leaseholder

To be a qualifying leaseholder you must have owned a long lease for the past two years.

A long lease is, mainly, a lease which had an original term of over 21 years when it was originally granted. How long is left on the lease is not relevant. It is how long the lease was for when it was first granted that matters.

But, even if you meet these criteria, you will not be a qualifying leaseholder if either of the following applies.

• The landlord is a charitable housing trust and your flat is provided as part of the charity’s work.
• It is a business or commercial lease.

Starting the process

You start the process by serving the tenant’s notice (section 42 notice) on the ‘competent landlord’.

The competent landlord is the landlord whose interest in the property is long enough to be able to grant the 90-year extension – that is, their interest is over 90 years longer than the time left on your lease.

In most cases, the immediate landlord will be the freeholder , and so is the obvious person to serve your notice on. However, there will be cases when the immediate landlord has an intermediate lease which is too short to give you a 90-year extension.

This will not prevent you from extending your lease, but you will need to identify the competent landlord who has enough interest to grant the extended lease.

Instructing professional advisers

For a successful application, we recommend that you appoint a valuer and a solicitor. As well as being able to offer general advice, their roles include the following.

• Providing the ‘best and worst’ case valuation, so they can tell you the possible outcome of the negotiations.
• Advising you on how much to offer in the notice.
• Responding to the notice the landlord sends in response to your notice (the landlord’s counter-notice).
• Negotiating and settling the price and other terms of the lease, including representing you at the tribunal .
• Preparing information for your application.
• Serving the notice on the competent landlord and giving any other landlords copies of the notice.
• Responding to the landlord’s requests for information to support your claim.
• Dealing with the legal process involved in buying the new lease ( conveyancing ).

You should make sure the advisers you choose have full knowledge and experience of the relevant legal practices and procedures.

Assessing the premium you should pay

The law does not say that you must have a full valuation in order to apply for a new lease, but we strongly recommend that you do not go ahead with your application without getting proper valuation advice.

Valuation is not an exact science, and it will be virtually impossible for the valuer to provide an accurate estimate of the final settlement figure. The valuer should be able to provide a ‘best and worst’ figure, valuing the lease from both your and the landlord’s perspective. They will also use their experience of properties in the local area to anticipate claims the landlord might make (including in response to your claim). There is no such thing as a definite, fixed price for a new lease and you should be aware from the beginning of the process of the likely range within which the price will be settled, so you are not surprised at a later stage.

When considering how much the premium is likely to be, you should also bear in mind that you will be liable for the landlord’s costs. The eventual cost of the new lease will be the premium, plus both your own and the landlord’s ‘reasonable’ legal and valuation costs (not including any costs which arise in connection with proceedings heard before a tribunal).

There are more details on assessing the premium you will have to pay in our leaflet ‘ Lease Extension -valuation’. You can use our lease-extension calculator to work out an estimate of the premium.

Gathering information

Before serving the tenant’s notice, you or your solicitor will need to gather all the necessary information to:

• make sure the notice is correct and valid; and
• respond to any challenge from the landlord during the period after you serve the notice.

You will need the following information.

• The identity of the competent landlord. This can be a person or a company, and you will need their name and address.
• Details of any intervening or head leases, and the name and address of the relevant head leaseholders.
• A copy of your own lease and documents which prove you own the flat (for example, Land Registry entries).

The competent landlord

In most cases this will probably be your immediate landlord if they are the freeholder or a head leaseholder with a lease which is at least 90 years longer than yours. However, in some cases your immediate landlord may be a head leaseholder with a lease that is only a few days, or a few years, longer than yours. If this is the case, you need to identify the landlord who has enough interest to grant you the new lease. To identify the competent landlord you will need to know the details (especially the length of their leases) of any intermediate landlords who may be between you and the freeholder.

You may already know some of this information, and you can get the rest in a number of ways, including those set out below.

The Landlord and Tenant Act 1985 (the 1985 act) – Under this act, you have the right to details of the name and address of your landlord. You can ask for this information, and it must be provided within 21 days. It is an offence to not provide these details if you ask for them. These details should also be on your ground rent and service charge demands.

Download a template letter requesting disclosure of landlord’s identity under Section 1 of the Landlord and Tenant Act 1985

A problem here is that your immediate landlord may not be the competent landlord for the purposes of the act. See below for how to find information on the freeholder or other intermediate leaseholders.

Land Registry – As long as the property is registered (most are) you are entitled to inspect the register and to receive copies of the entry relating to the freehold of your home. The entry will provide the name and address of the registered owner and details of any other interests in the freehold, including head leases and mortgages. There is a small fee for copies of the register.

There are a number of district land registries, and you should contact your nearest office to find the registry which serves the area your property is in.

Information notices – section 41 of the 1993 act gives you the right to serve notices on your immediate landlord, the freeholder (if different) or any other person with an interest in the property to ask for details of their interest.

This information would include the name and address of the freeholder or intermediate landlord, the length of the lease and details of the property the flat is in.

The people who receive the notices must respond within 28 days. Serving information notices does not formally start your application for the new lease or commit you in any way, and you will not become liable for any costs as a result of serving these notices.

Financing the lease

Before you begin, you will need to know how you will pay for the new lease. More urgently, you must make sure you can pay the solicitor’s and valuer’s professional fees. If you withdraw your application after serving your notice, you must pay the landlord`s reasonable legal and surveyor`s costs (and your own costs) up to the date you withdraw your application.

Preparing the tenant’s notice

The tenant’s notice triggers the legal procedures for buying the new lease and you are liable for the landlord’s reasonable costs from the date they receive it. So it is important that the notice is accurate and contains no mistakes because, although you can apply to the county court to have these corrected, there is a cost involved in doing this and you could avoid this expense. If the tenant’s notice is incomplete it will not be valid and the competent landlord can reject it.

If the ‘competent landlord’ is not the immediate landlord, you must serve the original notice on the competent landlord and send copies to the other landlords. The notice to the competent landlord should state who else you have given a copy to.

You can register the tenant’s notice with the Land Registry. This protects you if the landlord sells the freehold, as the procedure will be able to continue as though the new owner had received the original tenant’s notice.

Serving the tenant’s notice also fixes the ‘valuation date’ as the date of the notice. The valuation date is when any figures which affect the price and which can change are set, for example, the number of years left on the lease and the present value of the flat. So, however long it takes to negotiate or decide the price, the price will be based on the figures that apply on the date you serve the tenant’s notice.

We advise you to instruct a solicitor to prepare and serve the tenant’s notice.

The tenant’s notice

Under section 42(3) of the 1993 act, the tenant’s notice must contain the following.

• Your full name and the address of the flat.
• Enough information about the flat to identify the property the application relates to.
• Details of the lease, including its start date and the number of years for which it was granted.
• The premium you are proposing for the new lease or other amounts you are proposing to pay if there are intermediate leases involved (see the note below).
• The terms you are proposing for the new lease (if different from the present lease).
• The name and address of your representative if you have appointed one.
• The date by which the landlord must give their counter-notice, which must be at least two months from the date of the tenant’s notice.

Note: The premium quoted in the notice may not be the price that is eventually agreed following the tribunal’s decision or your negotiations with the landlord, but it will be the figure the landlord uses to calculate the deposit they will ask for. The premium you propose must be a genuine opening offer. Do not quote a very low figure in order to reduce the deposit, as the notice may not be valid if you do this.

Absent landlords

If, after all reasonable efforts, you cannot find the landlord, this should not prevent you from applying for a new lease.

• If the landlord is a company that is in receivership, you can serve the tenant’s notice on the receiver. If the landlord is an individual who is bankrupt, you can serve the notice on the ‘trustee in bankruptcy’. Both the receiver and the trustee are acting as landlord for the time being and, under the 1993 act, they must serve a counter-notice and grant the new lease.
• If you simply cannot find the landlord, you cannot serve the tenant’s notice. In this case, you can apply to the county court for a ‘vesting order’ to extend the lease. If the court is satisfied that you are eligible for a new lease, it will grant the lease to you in the landlord’s absence. The court will usually refer the case to the tribunal to decide how much the premium should be.

Application Form – Leasehold Enfranchisement: Missing Landlord – Lease Terms or Premium

Preparing for subsequent procedures

After you have served the tenant’s notice, the landlord can ask you for evidence that you own the flat and how long you have owned it for . The landlord has 21 days from the date you serve the tenant’s notice in which to ask for this evidence. If the landlord does ask for this evidence, you must provide it within 21 days, and you should make sure that your solicitor has all the information and documents needed to respond within the time limit. If you (or your solicitor) do not provide the evidence within the time limit, the landlord may serve a default notice and ask the court to order you to provide it.

The landlord also has the right to inspect the flat to carry out a valuation, but they must give you three days’ written notice.

At any time after receiving the tenant’s notice, the landlord can ask you to pay a deposit. This may be 10% of the premium you proposed in the tenant’s notice or £250, whichever is more.

The landlord’s counter-notice

The landlord must serve their counter-notice by the date stated in the tenant’s notice. The counter-notice must do one of the following.

• Admit your right to the new lease and accept your terms (or propose different terms).
• Not admit your right and give the landlord’s reasons for this. The county court will then decide whether you have the right to the new lease.
• Claim the landlord has the right to redevelop. The landlord can refuse to grant the new lease if they can prove to a court that they intend to demolish and redevelop the building. This only applies to applications where the remaining period of the lease is less than five years from the date of the tenant’s notice.

If, after the landlord’s counter-notice is served, you and the landlord cannot agree on the price or some other aspects of the sale of the new lease, there is a negotiation period of between two and six months. After the first two months of the negotiation period you or the landlord can apply to the tribunal for an independent decision on the issue. If you decide to apply to the tribunal, your professional advisers must have all the relevant documents that will be needed for this.

Application Form – Determination of Premium or Other Terms of Acquisition Remaining in Dispute: Flats and Premises – Lease Renewal

If the landlord does not serve a counter-notice by the date stated in the tenant’s notice, you can apply to the court for a vesting order. This application is not for a court order requiring the landlord to serve the counter-notice, but effectively takes the matter out of the landlord’s hands by asking the court to grant the new lease. The court will grant the vesting order on the terms proposed in the tenant’s notice.

If you decide to apply to the court for a vesting order, you must do this within six months of the date when you should have received the counter-notice.

Assigning the application

Once you have served the tenant’s notice, it can be assigned with the lease. This means that you can serve the notice and then sell the flat with the benefits of the application. The person who buys the flat will be able to go ahead with the application immediately, without having to have owned the lease for two years. This can help in cases where there are not many years left on the current lease, and this presents mortgage difficulties for anyone considering buying the flat.

Personal representatives

If you have the right to buy a new lease, but you die before making an application, for up to two years following the grant of probate or letters of administration your personal representatives will also have the right to buy a new lease.

Terms of the new lease

You should be aware of the legal requirements for the terms on which the new lease can be granted. These are as follows.

• A peppercorn rent (that is, no ground rent) will be charged for the whole of the term (the 90-year extension plus how long is left on the current lease).
• Modifications – to take account of any alterations to the flat, or the building, since the existing lease was granted (for example, to gas lighting or coal stores), or to correct a problem with the lease.
• Exclusions – since the 1993 act provides a right to continuously renew the lease, any existing clauses relating to renewing the lease or ending it early, or the landlord’s right to buy the flat if you decide to sell it, should be excluded.
• Additions – a requirement not to grant a sublease which is long enough to give the subtenant the right to a new lease under the act.
• The new lease must contain a clause giving the landlord the right to repossess the flat if they decide to redevelop the land. They cannot exercise this right until the end of the term of the existing lease, and to do this they must apply to the court for permission and pay you compensation for the full value of the remaining 90 years of the lease. This should not cause any difficulties if you need to take out a mortgage on the flat.

You can get more advice and guidance from us at any time during the preparation stage or after serving the tenant’s notice.

Procedures and time limits

• You serve an information notice under section 41 of the 1993 act. (You do not have to serve an information notice.)
• The landlord must respond within 28 days.
• You serve a tenant’s notice under section 42 of the act.
• The ‘valuation date’ will be fixed as the date you serve the tenant’s notice.
• The landlord can ask for extra information, but they must do so within 21 days of receiving the tenant’s notice.
• You have 21 days to provide any information the landlord has asked for.
• The landlord must serve a counter-notice by the date stated in the tenant’s notice. This date must be at least two months from the date you serve the tenant’s notice.
• If the landlord does not serve the counter-notice by the date stated in the tenant’s notice, you must apply to the court for a vesting order within six months.
• After the landlord serves a counter-notice, you or the landlord can apply to the tribunal for an independent decision. You must do this no sooner than two months from, but within six months of, the date the counter-notice is served.
• The fee for applying to the tribunal is £100, and the hearing fee (once you receive notice of a hearing date) is £200.
• The tribunal’s decision becomes final after 28 days. If you do not agree with the tribunal’s decision, you can appeal to the Upper Tribunal (Lands Chamber) before the decision becomes final, but only if you have the tribunal’s permission.
• After the tribunal’s decision becomes final, you and the landlord have two months to enter into the new lease.
• If you and the landlord do not enter into the new lease within two months of the tribunal’s decision becoming final, you have a further two months to apply to the court to order the landlord to meet their obligations

Related Pages

Leasehold extension - valuation, lease extension part 2, calculate the cost of a lease extension, lease extension (part 1), quiz - how well do you understand your lease, lease extension with ease, introduction to lease extension.

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Section 42 Notice – What is it and the Lease Extension Process

Everything you need to know about section 42 notice.

Subject to meeting specific eligibility criteria, the law provides leaseholders with a right to have their lease extended. This right is stipulated in the Leasehold Reform, Housing, and Urban Development Act of 1993, allowing the leaseholder to have a 90-year extension on their lease. To initiate the statutory leasehold extension process, a notice must be served on the freeholder or landlord. This Notice is commonly known as Section 42 Notice or the Tenant’s Notice. This guide highlights everything that you should know about Section 42 Notice.

Defining Section 42 Notice

A Section 42 Notice is a request formally served to a freeholder from a leaseholder. In addition to an entitlement to a 90-year lease extension, the ground rent is reduced to a peppercorn. Peppercorn rent refers to a small amount paid by a leaseholder to satisfy legal agreement between them and the freeholder. The Notice also outlines a proposed premium for the allowance of the lease extension. Within two months of serving a Section 42 Notice, the freeholder or landlord will respond through a Counter Notice. A Counter Notice shows the freeholder’s acceptance or rejection of the lease extension.

It is worth noting that not every tenant is legally permitted to serve a Section 42 Notice. You can only serve a freeholder with a Section 42 Notice if you are eligible for a lease extension.

Eligibility to Serve Section 42 Notice

A freeholder cannot reject a served Section 42 Notice provided the leaseholder is eligible for the formal lease extension. They may, however, reject the Notice on the basis of the premium offered or if the leasehold is not eligible for the lease extension. You are qualified to serve a freeholder with a Section 42 Notice if;

• You have owned the property for at least two years.
• The term of the initial lease granted extended to over 21 years.
• The property for which you are seeking a lease extension is not commercial or business property.
• The flat under the lease is not a function of a charitable housing trust.

Contents of a Section 42 Notice

The contents of the Tenant’s Notice are stipulated in the Leasehold Reform, Housing, and Urban Development Act of 1993. In accordance to this Act, Section 42 Notice contains the following elements;

• The tenant’s full name and address of the flat or property for which they seek lease extension.
• Identity of the property in question through sufficient provision of its particulars.
• The particulars of the tenant’s initial lease. These include the commencement date of the lease, the terms around the lease, the lease term, and the date the lease term started.
• The proposed premium payable to the freeholder in respect of granting lease extension for the property in question.
• The proposed terms by the tenant on the suggested lease extension.
• Details of the solicitor appointed to act on behalf of the tenant, including the name and address in England and Wales through which future notices may be served.
• The date the tenant desires to have the landlord or freeholder serve a Section 45 Counter Notice in response to the Section 42 Notice. This date must, however, be above the 2-month threshold required in servicing of a Counter Notice.

About the Section 45 Counter Notice

While the Section 42 Tenant’s Notice serves as the initiating document of the lease extension process, it is the Freeholder’s Counter Notice that determines the progress of the extension. Once served with a Section 42 Notice, the freeholder responds through the Counter Notice in either of the following ways;

• Accepting the lease extension request and consenting to your terms.
• Accepting your lease extension request but with the condition that you agree to alternative terms.
• Reject your request on the grounds of the landlord’s claim to redevelop the flat.
• Reject your request on the grounds of ineligibility to statutory requirements of a lease extension or faults found in your Section 42 Notice.

It is rare to have a freeholder reject the Tenant’s Notice. This is because rejecting a Section 42 Notice might lead the landlord into severe legal consequences. These may include order by a court to agree with the leaseholder’s terms or even losing control over the premium proposed on the lease extension. Often, when a freeholder accepts the request on condition that you agree to new terms, it is a way to create a window for negotiations.

Section 42 Notice is a significant document when it comes to lease extensions. Any fault found on it, therefore, can be a basis for its dismissal in a court of law. When your Section 42 Notice has been dismissed in court, it means that your request for lease extension has been brought to a halt. The worse consequence of a rejected Section 42 Notice is that you cannot make any other application for a lease extension for the next one year. This is why you should consider hiring a professional lease extension solicitor.

Benefits of Hiring a Solicitor to Serve Your Section 42 Notice

It is possible to serve a Section 42 Notice by yourself. However, getting a helping hand from an expert solicitor comes with numerous benefits, including;

• Experience and Expertise

Serving a Section 42 Notice that is incomplete and inaccurate is one of the reasons why the Notice can be dismissed in court. Lease extension solicitors have experience in serving numerous notices for different clients. They are, therefore, familiar with the common loopholes and faults that may lead to the rejection of a notice. With a solicitor, you can be sure that your Section 42 Notice will be served flawless. And the likelihood of the lease extension being granted by the freehold is also high, due to the legal participation and negotiating skills of a solicitor

• Notice Follow Up

Solicitors will help you follow up on the freeholder’s Counter Notice. In case the freeholder fails to serve a Counter Notice, solicitors will offer you guidance on the best course of action to take.

• Legal Advice

Serving a Section 42 Notice is a statutory procedure in its entirety. A lease extension solicitor provides you with legal guidance and support necessary when serving the Tenant’s Notice. They will clearly explain the legal procedure for serving the Notice and advise you on all the details that should be in the section 42 notice before you can finally serve it to the freehold.

• Negotiations

In addition to helping you prepare the necessary documents for a lease extension, solicitors also assist you in negotiating with a freeholder on the premium for the extended lease. They will be beneficial in turning the negotiation terms to your advantage. You may end up with a better deal from the section 42 notice when you let a solicitor take over the negotiations.

The Process of Serving a Section 42 Notice

Here is a step-by-step guide on the process of serving a Section 42 Notice;

• Lease Premium Valuation

Premium valuation is the process of establishing how much you will pay a freeholder for the lease extension. A Section 42 Notice should contain information on your proposed lease extension premium. The valuation of this premium should be established by an RICS valuer who is licensed to venture into this field. Valuers from the Royal Institution of Chartered Surveyors (RICS) are experts in estimating the cost of a lease for an extended period. The value of your premium should not be too low. A low premium valuation forms a basis to have your Notice rejected by the freeholder.

Hiring an RICS valuer is essential for the following reasons;

• They will help you know the right premium to feature in the Tenant’s Notice.
• They help you to establish the potential of a premium in all circumstances.
• The valuer will assist you in responding to the freeholder’s Counter Notice.
• The valuer offers guidance during negotiations with the freeholder on the payable premium.
• They will advise you on the state of a property and how that state is likely to affect its future service charges.
• Check Whether You Can Afford the Proposed Premium

You will be required to pay the freeholder a premium as compensation for lease extension and loss of ground rent income. You should, therefore, evaluate the premium valuation highlighted by your valuer to establish whether you can afford to make such a payment. Once you ascertain that you can afford the premium, you can now hire a solicitor for support in serving your Notice.

• Hire a Solicitor

A professional solicitor will help in handling the rest of the phases of serving a Section 42 Notice, including the following;

• Obtaining the relevant information to prove identity, address, and financial capacity to fund the premium.
• Obtaining a copy of your lease.
• Verifying your eligibility to apply for a lease extension.
• Getting the home address of the freeholder or landlord.
• Liaise with your freeholder to evaluate your reasons for a formal lease extension.
• Obtain details of the freeholder’s solicitor.
• Section 42 Notice Drafting

Your solicitor will also assist you in drafting a Section 42 Notice. The draft must contain all the elements as required by the Leasehold Reform, Housing, and Urban Development Act of 1993. Once they are done with drafting the Notice, you will be required to sign it in the presence of a signature.

• Serving the Notice

Once the Section 42 Notice has been drafted and signed, it is ready to be served to the freeholder’s address. This should be done by your solicitor through a special delivery or a courier. This is to ensure that the Notice has been received and signed by the freeholder. It is important to note that the cost of delivering the Notice is on you. The landlord may also require you to send the evidence of your eligibility for the lease extension.

In case you are unable to find the freeholder’s home address, you can request their last known address from the Land Registry at a fee of £3. If the freeholder cannot be located (an absent freeholder), you can apply to a court for a Vesting Order. The vesting order allows you to serve the Section 42 Notice to the court (on behalf of the freeholder).

What Next After Serving a Section 42 Notice?

Once you have served the Tenant’s Notice on the freeholder’s address and they have acknowledged receipt, the landlord has two months to respond to your request. The response is captured in the Counter Notice with the landlord showing their interest or disinterest in the request. If the freeholder has rejected your Notice without any grounds, then you are legally entitled to make an application to a court for a Vesting Order.

If the landlord approves your Tenant’s Notice and the necessary negotiations finalised, your solicitor will assist in registering the Section 42 Notice at the Land Registry. You will, however, be required to settle some financial obligations, including premium for the new lease, professional fees, ground rent, stamp duty, and other service charges.

Section 42 Notice Time Limits

• Issuance of the Section 45 Counter Notice

The freeholder is required by law to take at least two months before issuing their response to the Tenant’s Notice. Their response should be a formal document referred to as a Section 45 Counter Notice. In this document, the freehold should clearly outline that they have accepted the terms for a lease extension, or they decline the lease extension request. Should they reject the section 42 notice from the leasehold, they should also state in the counter notice all the valid reasons for the rejection as allowed by the law.

• Confirmation of Eligibility

The landlord may request proof of eligibility to lease extension. They, however, have only 21 days to request for this confirmation. The leaseholder is then allowed to reply to this request within 21 days.

• Inspection Notice

The freeholder has the right to inspect the property in question to establish its value. This process is, however, subject to a 3-day notice, and should be done in writing.

• Rejection of Tenant’s Notice

The freeholder has at least two months and at most six months to give reasons for the rejection of your Section 42 Notice. The reasons stated in the rejection document should, however, be valid enough for the lease extension request to be dismissed.

Section 42 Notice Fees

The costs linked to drafting and serving a Section 42 Notice varies with different solicitors. Here are some estimated costs to assist you in your conveyancing budget.

• Lease Extension Valuation Using a Qualified Valuer – £500 to £1000
• Leaseholder’s Solicitors Fee – £500 to £800
• Online ID Fee Per Person – £8
• Freeholder’s Solicitors Fee – £800 to £1500
• Obtaining Copy of the Lease – £3
• Register and Title Plan Copies Per Title – £6
• Registering the Section 42 Notice at Land Registry – £20

You may also be required to make extra payments for services such as obtaining a Vesting Order, negotiations for the lease extension premium, and completion of the lease extension process. All the cost estimates highlighted here are tax inclusive.

‘Assigning the notice – Is it all in the mind?’ Another case of ‘mind the registration gap’ Typeteam Limited v Douglas James Acton and Sarah Louise Elizabeth Lea CH/07/PTA/0067

In Leasehold reform by Mark Chick 12 February 2010

An interesting case from the High Court from the back end of 2007 that appears to have escaped much notice is Typeteam ( Typeteam Limited v Douglas James Acton and Sarah Louise Elizabeth Lea CH/07/PTA/0067 ).

This was a case concerning the assignment (or purported assignment of a Section 42 notice). In August 2006 Mr Rosner entered in to a contract to sell Flat 20, Cavendish Mansions, Mill Lane Hampstead to Mr Acton and Ms Lea. On the same day Mr Rosner served a valid section 42 notice on the landlords, Typeteam Limited.

The contract contained a provision requiring the benefit of the notice of claim to be assigned to the buyer on completion. The clause was in fairly standard terms. The parties also entered into a deed of assignment on the same day in relation to the notice.

However the deed of assignment contained wording to the effect that in consideration of the purchase of the flat, Mr Rosner:-

“hereby assignes unto the the buyers all that right and interest to obtain an extended lease of the property by virtue of service by the seller of the s.42 notice…”

Registration of the transfer completed on 21 September 2005. On 3 November 2005 the landlords served counter-notice expressed to be without prejudice to the contention that the claim had been deemed to be withdrawn by virtue of s.43 of the 1993 Act.

Section 43 of the 1993 Act provides in particular (Section 43(3)) that:

“Notwithstanding anything in subsection (1), the rights and obligations of the tenant shall be assignable with but not capable of subsisting apart from, the lease of the entire flat; and if the tenant’s lease is assigned without the benefit of the notice, the notice shall accordingly be deemed to have been withdrawn by the tenant as at the date of the assignment.”

The conventional wisdom is to rely on the provisions of s.27 of the Land Registration Act 2002 and to assume that the transfer cannot take effect at law until such time as the registration completes. Traditional transfer wordings therefore make mention of the fact that the transfer is not to take effect until such time as the registration completes and the notice is to vest in the buyer from that point.

Following service of the negative counter-notice the landlords commenced court proceedings for a declaration that the notice was deemed to be withdrawn on 7 July 2006. On 20 July 2006 Mr Rosner and the new owners entered into a deed of rectification seeking to rectify the assignment of the rights so that the deed of assignment should be read as if the assignment took place when the new owners became the registered owners of the flat.

In Typeteam Judge Cowell in the County Court heard argument from the landlords to that effect. However, he rejected this saying that in his view it was permissible to interpret section 43(3) as also including an equitable assignment so that there was no deemed withdrawal of the claim.

Whilst the landlords appealed the High Court agreed with the lower court and held that Mr Rosner had done ‘everything he could’ to pass the rights on to the buyer.

The court held that the clear intention of the parties was to assign the rights under the s.42 notice and that those rights should pass with the benefit of the lease. The assignment ‘could not take effect any other way.’

As such Sir Donald Rattee held that any other construction would have produced a ‘wholly unrealistic’ and ‘nonsensical’ result and held that on a ‘proper construction’ the lease was never assigned without the benefit of the s.42 notice and that the notice was not deemed withdrawn by virtue of Section 43(3).

This is an interesting case because it is not completely clear whether the decision tells us that an assignment will not fall foul of the provisions of Section 43(3) if it is expressed in such a way that it could take effect in equity only. The presence of the deed of rectification somewhat muddies the waters. However, notwithstanding the permissive view taken in this case, the standard precedent wording is clearly less likely to cause arguments.

9 March 2009

• 24 Jan 2020

What is a Section 42 Notice?

A Section 42 Notice (or Tenant’s Initial Claim Notice) is served by the tenant (flat owner) on the landlord and marks the beginning of the statutory lease extension process.

In order to serve a Section 42 Notice, you must be eligible to extend your lease under the Leasehold Reform Housing and Urban Development Act 1993. Generally, a flat owner is considered eligible if they meet the following criteria:

• The lease was in excess of 21 years when first granted
• The tenant has owned the property for two years

There are however certain other eligibility critera and exclusions;  to be sure you are eligible for a statutory lease extension, our team of experienced lease extension solicitors can help.

Contents of the Section 42 Notice

The main role of the Section 42 Notice other than starting the claim is to propose the terms of the lease extension; primarily the main part of this is to propose a premium (purchase price) for the lease extension process to the landlord. This price should be determined through a valuation by a qualified surveyor, as plucking a figure out of the air can lead to the notice being invalid. The notice will need to contain other terms and proposals in order to be valid, and you are best advised to liaise with an expert lawyer about these in order to get the Notice right first time.

Time limits

The Section 42 Notice gives the landlord/freeholder must give the landlord a deadline (which must be a minimum of two months) by which they must serve their Counter Notice (a Section 45 Notice). This Counter Notice will either accept or decline the terms (including the premium) put forward; if declined, the landlord will make counter-proposals. There will then be a further period of up to six months for further negotiations to try to reach an agreement.

If the landlord fails to issue a Counter Notice within the allocated time frame, then the flat owner can instruct their solicitor to apply to Court for a vesting order. If this is granted, the court will take over the responsibility of progressing the lease extension in line with the leaseholder’s terms.

Accuracy is key

A Section 42 Notice is an important legal document which your lease extension claim is based upon; once it is served, it starts a timetable for progression and obligations on you to pay the landlord’s costs. It must be submitted correctly and without any inaccuracies. If there are inaccuracies, the notice could be rendered invalid; disputing validity in the Courts is a costly exercise, you may have to start the claim process again with a new Notice; in certain circumstances you may not be able to make another application for a further twelve months.  This can be particularly troublesome if your lease is running low and approaching 80 years remaining – once the lease drops below 80 years remaining the premium you pay increases significantly.

Do you need help drafting a Section 42 Notice? Our team of skilled lease extension lawyers can help you through the process and submit a legally accurate notice on your behalf, putting your mind at ease. Call Laura Russell today on 023 8082 0528 to discuss your requirements or email  [email protected]

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Section 42 Deed Of Assignment Of Benefit Of Lease Extension Claim

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Defective Section 42 Notices

When seeking to exercise a right to extend a lease, a tenant is required to serve what is known as a section 42 notice on the landlord. Amongst other things, the Leasehold Reform, Housing and Urban Development Act 1993 requires the following principle information to be included in the notice:

• The names of the relevant parties;
• Sufficient particulars to identify the property
• Sufficient particulars to identify the lease;
• The premium the tenant proposes to pay the landlord;
• The terms the tenant proposes to be inserted in the lease; and
• The time in which the landlord has to respond.

Failure to omit any of the required information, or not to provide sufficient detail, may result in the notice being deemed invalid. If a notice is invalid, unless the landlord is prepared to waive the invalidity, the notice will be considered defective. As a result, not only will the notice not be considered sufficient for the purpose of instigating the procedure to extend a lease, but the tenant may be timed-bared from serving a further notice for a period of 12 months as a result. Not only will the cost of preparing the initial notice be wasted but, furthermore, the value of the lease will continue to diminish over the 12 month period which will, in turn, result in a higher premium being payable to the landlord.

In certain circumstances it is possible to save a defective notice by an application to the County Court. It is, of course, preferable that the initial notice is correctly drafted in the first instance.

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About the Author

Syed alam, partner, head of real estate healthcare.

Syed Alam is a Worcester solicitor , specialising in real estate .

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What is a Section 42 Notice?

Are you eligible to extend your lease, can a landlord or freeholder refuse to extend a lease , have a project that you need help with.

• Practical Law

Is it possible to assign the benefit of a section 42 notice which was served after exchange but before completion of the sale of a lease?

Practical law resource id 6-530-6945  (approx. 3 pages).

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• Formal Vs. Informal Route
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Leasehold Enfranchisement Solicitor at Hetts

Section 42 Notice Template

Important - It is important that the notice on the landlord is drafted correctly. We strongly recommend that you ask a solicitor with experience in lease extensions to prepare the notice. Not only can errors prove costly, but service of the notice also puts obligations on the tenant should the landlord request. Please see our page on Section 42 Notices for more information on this. We have provided this section 42 notice template for information purposes only, take legal advice before submitting any legal notice.

The notice header / title

The header of the notice should include the following wording:

NOTICE OF CLAIM This notice is for an extension to the term of a lease under the Leasehold Reform, Housing And Urban Development Act 1993 section 42 ("The Act")

Define the leasehold property

Start the notice by stating the full address of the leasehold property:

In connection with the property known as [leasehold address]

Landlord's and leaseholder's details:

State the name(s) and address of the competent landlord , also any managing agent or any other party to the lease, as well as your full details:

To: [competent landlord's name and address] and to: [name and address of any other party to the lease such as the managing agent] From: [leaseholder's name(s) and correspondence address

The wording of the notice

We recommend using the following wording to commence the content of the notice:

You are notified that: 1 The address of the flat in respect of which I claim a new lease under the Leasehold Reform, Housing and Urban Development Act 1993 Part I, Chapter II is [leasehold address] ('the Flat'). 2 The freehold property to which this notice of claim extends is [freehold address]

The particulars of the lease

Define the exact particulars of the original lease deed:

3 The particulars of my lease are: Date: 01 January 1950 Parties: (1) [Original lessor name] (2) [Original lessee name] (3) [Original managing agent, if any] Term granted: 99 years Date of commencement of term: 01 January 1950 Property comprised in lease: [leasehold address]

Eligibility

State that you are eligible; you must have been a leasehold proprietor for at least 2 years:

4 I have owned the flat for [5] years. I have been named on the Land Registry Proprietorship Register since [date].

The offered terms

Put forward your offered premium:

5 I propose to pay a premium for the grant of a new lease in the sum of [£XX,XXX.XX] 6 In accordance with the Leasehold Reform, Housing and Urban Development Act 1993 Schedule 13 I also propose the following terms: (a) Ground rent reduced to nil (b) Landlord fees of [£450 plus VAT] (c) The new lease term to run for a period of [189] years from [1950]

Address for landlord to respond

Usually a solicitor will be appointed and the landlord should be informed of this appointment and their details:

7 I appoint my agent, [name / solicitor], to act for me in connection with this matter. The address to which any notice to me should be made under The Act is [solicitor's address].

Deadline for landlord to respond

You must inform the landlord what deadline you have set for a response. As mentioned previously, you need to provide a minimum of 2 months from the date of deemed receipt of the section 42 notice:

09 You must respond to this notice by serving a counter-notice under Section 45 of The Act section 45 by [date at least 2 months 3 days in advance].

Landlord must copy in any other party to the lease

Remind the landlord to send a copy of any reply to their notice to any relevant pary:

10 You must send a copy of your respond to this notice to any person or company who is known or believed by you to be a competent or other landlord of the Flat.

Sign and date the notice

Don't forget that the notice must be signed and dated to be valid. An agent / solicitor can only sign on behalf of the leaseholder under a valid Power of Attorney:

Signed by: Date:

The notice should be sent via recorded delivery to provide proof of postage. An example section 42 notice is shown (blurred out for confidentiality reasons) below.