If you live in a leasehold flat and are looking to extend your lease, you might need a Section 42 Notice.
But what is a Section 42 Notice? And how do they work?
In her latest article for the firm, Leasehold Specialist Niki Adkins answers all of this and more…
What is a Section 42 notice?
A Section 42 notice is delivered by the owner of a residential flat (a leaseholder) to force the freeholder to grant a lease extension. Leaseholders can do this under the Leasehold Reform, Housing & Urban Development Act 1993 (“the 1993 Act”).
Is there a strict timeframe on Section 42 notices?
Yes, if you serve a Section 42 notice, there are strict timeframes in place which the freeholder adheres to in response.
It may not necessarily be the freeholder that has to grant the lease extension; it could be the owner of a head lease that has a very long term, but for the purposes of this article, we shall assume it is a freeholder.
How many years does a Section 42 Notice increase my lease by?
The lease extension will grant the leaseholder an additional 90 years on top of however many years are currently left on the lease. For example, if the lease currently has 80 years left, a lease extension will increase that to 170 years.
You can read our dedicated article on why you need to extend your lease and how to go about it here.
How does a Section 42 notice affect my ground rent?
The lease extension will also reduce the ground rent to a peppercorn (which is a legal term for zero/nil) on completion.
You can read our dedicated article on ground rent here.
What does a Leaseholder have to pay for in a Section 42 Notice?
A premium will be payable in most cases for the extension, and the leaseholder is required to pay the freeholder’s reasonable legal and valuation fees.
The Section 42 Notice will contain an offer for the premium payable for the extension. This will usually be lower than the true value of the extension, to allow scope for negotiation.
How long does a freeholder have to respond to a Section 42 notice?
The deadline for a freeholder to respond with a counter-proposal (Section 45 Counter Notice) will be set out in the Section 42 Notice. By law, the leaseholder must give the freeholder at least two months from the date of the Section 42 Notice.
During that time, the freeholder’s valuer will need to arrange an inspection of the flat to prepare their valuation report and advise the freeholder on the likely premium payable.
At the same time, the freeholder’s solicitors will need to confirm the leaseholder’s entitlement to a lease extension and prepare the Counter-Notice so it can be served before the deadline.
If the freeholder fails to serve you with a Counter-Notice in time, you can apply to the court to obtain the lease extension on the terms set out in their Section 42 Notice.
The figure will usually be lower than the premium that would ultimately be agreed, it is in the freeholder’s best interests to put forward their own counter-proposal. Doing so protects their position and allows for proper negotiation of a more realistic price.
Can a Section 42 notice be refused?
Provided the Section 42 Notice is valid, the leaseholder meets the criteria set in the 1993 Act, and there is nothing preventing the leaseholder from serving a Section 42 Notice, it cannot be refused.
Specialist Leasehold Experts
If you have received a Section 42 Notice and would like to speak to an expert, you can speak to a member of our team by calling 01202 499255, or by filling out the form.
We offer all new clients a free initial chat.-
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