The Section 42 Notice - Lease Extensions
What is a section 42 notice?
A section 42 notice is a document served by a tenant of a long (21+ years) lease on the landlord setting out the proposed terms of a new lease.
Provided the tenant meets the elibibility criteria, they have a legal right to renew their lease (extend the number of years remaining). In consideration for this extension to the term of the lease, the landlord is entitled to charge a premium. The focus of the section 42 notice is primarily to establish an offer to the landlord setting out how much the tenant is willing to pay for an increase the term remaining on the lease (usually a further 90 years).
A qualifying tenant has the right to serve a notice at any time as provided by s.42 of the Leasehold Reform, Housing and Urban Development Act 1993 "the Act".
Serving notice on the freeholder
It is strongly recommended that you take legal advice prior to serving a notice to avoid wasted time and costs. Small errors can deem a notice invalid. Further to this, valid notices put further responsibilities on the tenant who served it.
Serve on the competent landlord
The notice must be served not only on the 'Competent Landlord' but also on any other party with an interest in the lease, such as a management company.
The competent landlord may not always be the head freeholder. For example, in some cases the head freeholder grants a long lease to an intermediary leaseholder, who then grants a sub-lease to the tenant (flat owner). The competant landlord here would be the intermediary leaseholder. However, to complicate matters, the intermediary leaseholder would not be 'competant' if the intermediary lease did not have sufficient years left to grant a lease extension. In these cases the it is important to check that the intermediary lease has at least 90 years additional term remaining than the lease of the flat.
It must include:
- The leaseholder(s) full name(s).
- The address of the leasehold property and correspondence address, if different.
- Particulars of the lease, such as the date it was granted and original parties.
- The proposed premium (we recommend making an offer on the low side to allow room for the negotiation stage).
- Number of years increase (normally an additional 90 years).
- Any proposed changes to the ground rent.
- Provide the freeholder with a deadline to submit a counter notice of no less than 2 months from the date of the notice.
We strongly recommend that you instruct a solicitor to submit the notice as any errors could prove costly further into the process. If the notice is withdrawn a further section 42 notice cannot be served until a period of 12 months has expired from the date of the original notice. We have provided a Section 42 Notice Template for those interested.
The Landlord's response to the notice
The landlord has to respond to the notice by the deadline set within it, which is usually 2 months after the deemed date of receipt of the notice.
The landlord's counter notice is called a section 45 notice for more details on this, see section 45 notices.
Tips on serving a section 42 notice
Send the notice by recorded delivery in the event that the landlord denies receipt.
Ensure that you have funds available equal to 10% of the premium offered in the notice, as the landlord can demand this to be paid within 14 days of a request.
Once the notice has been served the landlord can request access to the property with 3 days notice, so ensure that you speak to any tenants in the flat to make them aware of this.
After serving a notice (valid or not), you cannot serve another notice for a period of 12 months, so ensure you seek legal assistance.
Don't forget to serve any other parties to the lease such as any management company.