Serving a Section 42 Notice for a Lease Extension in London
by Tarjinder Rayat — Posted on 23 October, 2018
Statutory route for extending the lease of a London property by serving a Section 42 Notice on my Landlord
How do I carry out a Lease Extension on my London property?
Renewing the lease on your London property will ensure that the value does not decrease in the near future, thereby making it easier to sell. It is important to extend the lease on your property before you have 80 years remaining, because at this point a marriage value is payable to the landlord for the loss of ground rent. This is most commonly done by serving a Section 42 Notice on the landlord.
What is the Marriage Value of a property?
Marriage value is the difference between the value of the property before and after the lease extension has been completed. This can be calculated by taking into consideration the difference between the accumulative interest of the landlord and leaseholder, before and after the lease extension is granted. According to legislation, a property has no marriage value when the lease does not exceed 80 years.
Although the market value of the property increases, this is only at the discretion of the landlord granting the lease. Consequently, legislation is in place to ensure that the marriage value is split equally between the landlord and tenant.
How can I arrange a lease extension through my Landlord?
A lease extension can be arranged with your landlord, who is entitled to a premium for carrying it out. There are two methods for extending the lease through your landlord; the formal method, also known as the statutory route, and the informal method.
Informal Route: Negotiating directly with the Landlord
You can arrange to extend your lease by liaising directly with your landlord or one of their solicitors. If you choose to extend the lease in this manner your solicitor will then only be required to formalise these terms by drawing up a legal document signed by both parties. However, it is possible that the landlord can refuse to extend the lease or arrange it on their terms.
Formal Route: Section 42 Notice
This method requires your solicitor to serve a statutory Section 42 Notice onto the competent landlord. The competent landlord is the landlord with a sufficiently longer interest in the property as to be able to grant the 90-year extension, as well as the unexpired term of the lease. Additionally, the Notice should also be served on all other third parties to the lease. A third party is any party to the lease, excluding the tenant under the lease and the tenant’s competent landlord; e.g. a management company or a surety.
We would advise tenants to take this statutory route and serve a Section 42 Notice, as this can help to prevent delays in obtaining the lease extension.
What information is included in the Section 42 Notice?
The Section 42 Notice contains the following contents relating to the tenant’s lease extension on their leasehold property:
- Name of the tenant.
- Address of the property.
- Particulars of the property, including any additions such as garages etc. (though a full plan of the property is not strictly required).
- The specified premium and the division of the premium between the landlords, if there is more than one.
- Details of any other leases including the property in question.
- The full terms to be contained in the new lease.
- The commencement date of the agreed terms for the lease.
- Date for service of a counter-notice by the landlord, which must be a minimum of 2 months following the issuing of the Section 42 Notice.
- Name and address of the tenant’s legal representative.
What is required to make a valid Section 42 claim?
Under the Leasehold Reform, Housing and Urban Development Act (1993) a tenant must have held the property continuously for a minimum of two years in order to serve a Section 42 Notice. The lease must also be registered at HM Land Registry as an estate contract before the Section 42 can be issued to the Landlord. Failure to register the lease extension prior to the time of purchasing will mean the Section 42 is not legally binding.
Both parties will agree to the arranged premium by signing the Section 42 Notice, however the tenant does not need to personally sign the Notice. This means that someone can sign on the tenant’s behalf – typically the tenant’s solicitor or, if the tenant is a company, a representative or director. We would advise that the premium is set by a regulated chartered surveyor before the Section 42 Notice is signed. For more information on the importance of obtaining a valuation from a chartered surveyor and carrying out a Lease Extension directly through your landlord please see our blog on [negotiating lease extensions].
What are the Procedures and Statutory Time limits for a Section 42 Notice?
- Leaseholder serves S41 Information Notice (discretionary).
- Landlord must respond within 28 days.
- Leaseholder serves S42 Tenant’s Notice.
- The “valuation date” will be fixed as the date of service of the S42 Tenant’s Notice.
- Landlord may request additional information, but he must do so within 21 days of receipt of the Tenant’s Notice.
- Leaseholders must respond to this request within 21 days.
- Landlord must serve a Counter-Notice by the date specified in the notice. This date must be at least two months from the date of service of the Tenant’s Notice.
- Where the landlord fails to serve the Counter-Notice leaseholders must apply to court within six months for a Vesting Order.
- After service of the Counter-Notice either party may apply to the Tribunal. This must be done no sooner than two months from, but within six months of, the date of service of the Counter-notice.
- The Tribunal determination becomes final after 28 days. Appeals must be made within this period to the Lands Tribunal, but only with the leave of the Tribunal.
- After the Tribunal decision is final the landlord must provide draft lease within 14 days.
- There is then a period of two months after decision becomes final for both parties to enter into the new lease.
- If the period above elapses without entry into new lease, then leaseholder must apply to court within a further two months requiring the Landlord to meet his obligations
How Starck Uberoi can help
Do you require assistance with serving a Section 42 for a lease extension on your London property? Our experienced Conveyancing lawyers will deal with your matter quickly and efficiently. For more information please visit our Conveyancing page, or to book an appointment please call 020 8840 6640. We are based in Ealing; our West London Ealing office is located 10 minutes from Ealing Broadway station. For an appointment at our London Belgravia office a few minutes from Victoria Station call 020 7824 5118.