Vesting Order - Landlord's failure to respond to a section 42 notice
Failure to provide a counter notice
Where a tenant has served a valid s.42 notice (a notice of intention to apply for a lease extension) on a landlord, then a counter notice must be served by the landlord on the tenant within the time period specified by the notice, being a minimum of two months from the date of the notice. But what happens when no response is provided by the landlord?
Where a landlord has failed to respond to a section 42 notice, the tenant must apply to the County Court for a Vesting Order. If successful, this order effectively takes the matter out of the landlord's control as the court will likely grant the new lease to the leaseholder due to the landlord’s default and the terms will be as set out in the tenant’s original section 42 notice.
What the law says
The relevant law is set out in s.49 of the Leasehold Reform, Housing and Urban Development Act 1993 which covers applications where a landlord fails to give counter notice and can be simplified as follows:
Subsection 1 of the act:
Where the tenant’s notice has been given in accordance with section 42 but:
(a) the landlord has failed to give the tenant a counter-notice... the court may, on the application of the tenant, make an order determining, in accordance with the proposals contained in the tenant’s notice, the terms of acquisition.
The above means that where a landlord has failed to provide a counter notice, under secion 45 of the same act, the tenant can apply to the court for a vesting order. Most likely the court will grant a new lease on the same terms set out in the tenant’s original notice.
Subsection 2 of the act:
(2) The court shall not make such an order... unless it is satisfied that the tenant had the right to acquire a new lease
This means that the tenant must have the right to acquire a lease extension / new lease. Therefore:
- The tenant must have owned the leasehold property for 2 years or more, and
- The section 42 notice served by the tenant must be valid
Deadline for a vesting order application:
Subsection 3 of the act:
(3)Any application for an order must be made not later than the end of the period of six months beginning with the date by which the counter-notice or further counter-notice referred to in that subsection was required to be given.
Therefore a leaseholder must apply to the court within a period of 6 months starting at the point the landlord should have served a counter notice by.
Vesting orders benefit the tenant
Under case law it was held be the Court of Appeal in (Willingale v. Globalgrange  2 EGLR 55)that the words "the court may make an order" actually mean "the court must make an order". Therefore the court has very little discretion in granting the order for a lease extension. If the landlord fails to respond to a section 42 notice, it's very likely the court will grant a new lease on the same terms set out by the tenant in the original notice. Effectively the tenant gets a new lease on his terms, at his price. A leaseholder can expect to obtain a lease extension at a far more favourable price if a vesting order is granted.
Proving delivery of a notice
Clearly a tenant will need to prove delivery of the section 42 notice, as this will likely be denied by the landlord. It is strongly recommended that a solicitor is appointed to serve the notice to ensure it's validity. So what constitutes proof of delivery?
The Act itself is very vague on this topic. Under section 99: "Any Notice required or authorised to be given under this Part (a) shall be in writing, and (b) may be sent by post."
To help clarify the Act s7 of the Interpretation Act 1978 is applied by the Courts:
In the case of Calladine-Smith v Saveorder Ltd it was held that this means that if the sender of the notice could show that the notice had been properly addressed and posted then it would be deemed served in the ordinary course of post. However, this presumption could be rebutted. In this case, on the balance of probabilities, it was held that the counter-notice had not been received.
Therefore, although not strictly necessary, it is important for any notice to be sent via a service providing proof of delivery.