When you want to extend your lease, you’ll need to start the process by serving a Section 42 Notice. It’s an important step for homeowners who want to protect the value of their property and secure their long-term rights. In this guide, we'll break down what a Section 42 Notice is, how it works, the potential costs, and what to keep in mind before getting started.
What is Section 42?
A Section 42 Notice is a formal written request from a leaseholder to extend their lease. It comes from Section 42 of the Leasehold Reform, Housing and Urban Development Act 1993, which gives qualifying leaseholders the right to extend their lease (90 years for flats or up to 50 years for houses). Meeting the right criteria is essential, but securing this extension can help boost your property’s value and help you avoid complications caused by a short lease.
Eligibility criteria
To serve a Section 42 Notice, leaseholders must meet certain conditions. However, this can differ based on the specifics of your lease or freeholder arrangements. In general, the eligibility criteria includes:
Ownership: You must have owned the property for at least two years.
Original lease term: The original lease must have been granted for more than 21 years.
Lease status: The lease must not have fallen into disrepair or a breach of the terms.
Property type: Section 42 applies to flats, but there are alternative laws in place for houses.
What is the Section 42 Notice process?
The process of serving a Section 42 Notice isn’t as daunting as it sounds. It just follows a series of legal steps:
1. Draft and serve the Section 42 Notice
The first step is to prepare and serve the Section 42 Notice to the freeholder. This document requests a lease extension and must meet specific legal requirements.
Key components of the notice include:
Leaseholder’s details: Your name and address, proving your eligibility.
Freeholder’s details: The legal owner’s information.
Property description: A clear and detailed description of the property.
Proposed premium: Your offer to pay for the lease extension, determined by a professional valuation.
Proposed terms: Any changes to the current lease conditions.
Deadline for response: A minimum of two months for the freeholder to respond.
2. Freeholder’s response
Once the Section 42 Notice has been requested, the freeholder needs to respond within the stated deadline. This must be no longer than two months from the date of the notice. Their response will determine the next steps in the process.
Possible freeholder responses include:
Acceptance: The freeholder agrees to the lease extension terms, and both parties make the agreement official.
Counter offer: The freeholder disagrees with your premium or terms and provides their own valuation.
Rejection: The freeholder may dispute your eligibility or the terms of the notice. This is rare but can occur.
If the freeholder fails to respond within the deadline, you can apply to the court to put your rights into play for the lease extension.
3. Valuation and negotiating terms
You need to get a valuation to determine the lease extension's premium (the price). Both the leaseholder and the freeholder usually hire surveyors to provide independent valuations. Key factors influencing valuation include:
Remaining lease term: Shorter leases cost more to extend.
Ground rent: The higher the ground rent, the higher the premium.
Property value: The market value of the property impacts the freeholder’s future interest.
Marriage value: If the lease has less than 80 years remaining, the premium includes a marriage value. This is the added value created by extending the lease.
Negotiations occur between solicitors or surveyors representing both parties. They aim to agree on fair terms without the issue going to a tribunal.
4. Formal agreement of terms
Once both parties agree on the premium and lease terms, the process moves to make the agreement legal. The leaseholder’s solicitor prepares a draft lease document which states the agreed terms. The freeholder reviews the document and decides to agree or request amendments. Steps to finalisation include:
Both parties need to sign the lease extension agreement.
You pay the agreed premium, along with any associated legal and valuation fees.
You need to register the new lease with HM Land Registry. This is an essential step to make ownership rights formal.
5. Tribunal intervention (if necessary)
If negotiations fail, the matter would then go to a First-tier Tribunal (Property Chamber). They help to solve any residential property disputes.
Tribunal process overview:
Application: The leaseholder or freeholder who does not agree will apply to the tribunal. This will outline the terms that they are not agreeable with.
Hearing: This is a chance to present evidence, including any valuation reports and arguments from both sides.
Decision: The tribunal determines a fair premium and lease terms.
The tribunal’s decision is legally binding, although appeals are possible if you do not agree. While tribunals add time and costs to the process, they provide a resolution when private negotiations do not work.
6. Completing the lease extension
Once the final terms are in place with any disputes resolved, the lease extension process finishes with:
Payment of the premium and fees: The leaseholder pays the agreed amount, along with the freeholder’s legal and valuation costs.
Execution of the new lease: Both parties sign the new lease, and the document is final.
Registration with HM Land Registry: The leaseholder’s solicitor then updates the lease with HM Land Registry. This will make the new terms official.
Payment of the premium and fees: The leaseholder pays the agreed premium, along with the freeholder’s reasonable legal and valuation costs.
Execution of the new lease: Both parties sign the new lease, and the document is finalised.
Registration with HM Land Registry: The leaseholder’s solicitor registers the updated lease with HM Land Registry to reflect the new terms officially.
How much does Section 42 Notice cost?
The cost of serving a Section 42 Notice and completing a lease extension depends on several factors. Here’s a breakdown of potential expenses:
1. Premium for lease extension
The premium is the cost of the extension and depends on factors such as:
The remaining lease term
The ground rent
The property’s value
The freeholder’s reversionary interest (future ownership)
💡Editor’s insight: “For short leases (less than 80 years), the cost of extending the lease can go up because of ‘marriage value’. This is the added value of extending the lease.”
2. Professional fees
You’ll need a lease extension lawyer plus surveyors to handle the process. Costs include:
Solicitor fees: Roughly £1,000-£3,000+ depending on the complexity of the case and negotiations.
Valuation fees: Roughly £500-£1,500 for an independent surveyor to estimate the premium. This will depend on the price and location of the property.
3. Freeholder fees
Leaseholders usually pay for freeholder’s reasonable costs for:
Reviewing the Section 42 Notice
Hiring their own solicitor and surveyor
4. Tribunal fees (if applicable)
If the matter goes to a tribunal, you can expect costs for legal representation and filing fees.
Things to consider before a Section 42
Before proceeding with a Section 42 Notice, consider the following:
Timing: When your lease term approaches 80 years, a Section 42 Notice is worth considering. Beyond this point, the premium increases due to marriage value. So acting sooner can save you money in most cases.
Professional advice: You should talk with an experienced solicitor and surveyor early in the process to make sure you are within the law and are clear with the case. Mistakes in the notice could make your claim valid and take longer.
Freeholder relationships: If you and the freeholder are on a friendly basis, you could discuss an informal lease extension outside Section 42. This approach can reduce costs but offers less protection.
Future plans: You should consider how a lease extension fits into your long-term property plans. Whether you're planning to sell or stay in the property, a longer lease adds value and reduces complications.
When can you not extend a lease?
There are situations where you may be unable to extend your lease under Section 42:
Ineligible leaseholder: If you haven’t owned the property for at least two years, you can't serve a Section 42 Notice.
Property restrictions: If your property is owned by housing trusts or charitable organisations, some restrictions could stop a lease extension.
Expired lease: If your lease has expired, you’ll need to negotiate a new agreement. You would need to consider a different legal option rather than a lease extension.
Final thoughts
Thinking about serving a Section 42 Notice? It’s a big step, but you don’t have to handle it alone. Our experienced property solicitors can guide you through every part of the process. We make legal matters simple, providing expert advice tailored to your situation. Whether you want to extend your lease or explore your rights as a leaseholder, we’re here to help you make confident, informed decisions.
References
Solve a residential property dispute by Gov.UK
Leasehold property by Gov.UK
Disclaimer: This article only provides general information and does not constitute professional advice. For any specific questions, consult a qualified accountant or business advisor. Bear in mind that tax rules can change and will differ based on your circumstances.