What is a Section 42 Notice?
A Section 42 Notice is a formal legal document served under the Leasehold Reform, Housing and Urban Development Act 1993. It allows a qualifying tenant of a long lease (typically one exceeding 21 years) to request a statutory lease extension from their landlord. This right entitles the tenant to extend their lease term by 90 years in addition to the remaining term and to reduce the ground rent to a nominal (peppercorn) amount.
Eligibility Criteria
- The tenant must have held the lease for at least two years.
- The lease must originally have been granted for a term exceeding 21 years.
Purpose of the Notice
The Section 42 Notice initiates the formal process and includes:
- Proposed Terms: The tenant’s offer for the premium they are willing to pay for the lease extension.
- Lease Details: Identification of the property and the lease.
- Proposed Date: A date for the landlord to provide their formal response, known as the Counter Notice (at least two months after the notice date).
Key Points
The premium represents compensation to the landlord for extending the lease. This takes into account:
- The loss of future ground rent.
- The deferment of the landlord’s reversionary interest.
The Section 42 Notice begins a statutory timetable for negotiations. If no agreement is reached, the matter can be referred to the First-tier Tribunal (Property Chamber) for determination.
Important Note
Serving a precise and valid Section 42 Notice is crucial to avoid delays or legal challenges. Tenants are advised to consult a solicitor or surveyor experienced in leasehold enfranchisement to assist with the notice and premium calculation.
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").
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 eligibility 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 to increase the term remaining on the lease (usually a further 90 years).
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. Furthermore, valid notices put additional 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 competent landlord here would be the intermediary leaseholder. However, to complicate matters, the intermediary leaseholder would not be 'competent' if their lease did not have sufficient years left to grant a lease extension. In these cases, it is important to check that the intermediary lease has at least 90 years more than the lease of the flat.
The notice 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 negotiation).
- Number of years increase (normally an additional 90 years).
- Any proposed changes to the ground rent.
- A deadline for the freeholder 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.
Can't Find the Freeholder?
If your landlord is missing, then follow the guide on lease extensions with absent landlords.
The Landlord's Response to the Notice
More information is available on our other page: Received a Section 42 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 inform 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.
