What happens once a section 42 notice has been served?

When a leaseholder decides to extend their lease, one of the most important milestones is the service of the tenant’s notice, more commonly known as the section 42 notice. This is the cornerstone document that starts the lease extension process and ensures the freeholder must reply within a set time.

I am often asked by leaseholders: “What happens next?”

Serving the s.42 notice is only the beginning of a structured legal timetable. Understanding what follows can help you feel more less anxious about how long matters are taking, particularly if your freeholders solicitors are slow to progress things.

In this article, I’ll set out the key stages after the Section 42 notice has been served, explain the role of each party, and give an overview of the statutory deadlines you need to keep in mind. Whether you are looking to extend a short lease or extend as a means of removing a doubling ground rent, I hope this guide is useful.

If you are ready to deal with your short lease or ground rent issue, head to our lease extension service here.

Step 1: Landlord Requests Evidence of Ownership and Deposit

Once the landlord receives the Section 42 notice (for more on what is a section 42 notice, see this post), they will appoint solicitors and are entitled to request:

• proof of the leaseholder’s right to extend (for example, evidence of ownership of the flat)

• A deposit. This is 10% of the premium proposed in the s.42.

The leaseholder’s solicitor will deal with providing the necessary information and ensuring the deposit is paid promptly and it is the leaseholders role to ensure funds are ready if needed. Note that in some cases, such as a local authority freeholder, a deposit may not be requested.

Step 2: The Landlord’s Counter-Notice

The most critical deadline is the landlord’s obligation to serve a counter-notice under Section 45.

The landlord has at least two months (but not more than the date stated in the Section 42 notice) to respond.

In that counter-notice, the landlord can: 

1. Accept the leaseholder’s right to a new lease, while disputing the premium or terms (this is what happens in 99% of cases we handle). 

2. Dispute the leaseholder’s right, for example if they believe the notice is invalid or hasn't been served properly.  (rare but no unheard of, especially in the case of generalist solicitors that are not aware of the very specific rules applicable to leasehold law)

3. Offer their own proposals for the new lease terms.

If no counter-notice is served in time, the leaseholder can apply to the court for a vesting order, effectively granting the new lease on the leaseholder’s terms. This does not happen very often, perhaps once or twice a year, as the freeholder effectively loses the ability to negotiate and ends up with a lower premium than they are entitled to by law.

Step 3: Negotiations

Once the counter-notice has been served, both parties usually enter a period of negotiation.

This stage is about agreeing the premium (price) and any other terms of the new lease. This can be a good time to fix any known issues within the old lease such as incorrect colouring on a lease plan, for example.

The negotiations relating to the lease are normally conducted between the solicitors, with the price being negotiated by the value. Cases settle within this period of six months after the s.45 notice has been served.

Step 4: Application to the Tribunal (if necessary)

If the parties cannot agree the terms, either side can apply to the First-tier Tribunal (Property Chamber) for a decision. in reality this is almost always the leaseholder making the application, as the freeholder is usually content to let the notices time out (their costs are still paid and the leaseholder has to start again).

The application must be made within than six months from the date of the landlord’s counter-notice. The Tribunal will then resolve the issues in dispute, whether this is the new lease premium or the clauses to be contained in the deed of variation.

It is worth noting that most disputes settle before a final Tribunal hearing, often once the timetable for evidence and the hearing date has been set. Perhaps only prime central London flats end up at a hearing or those with potential roof space development value - both are likely to mean substantial premiums.

Step 5: Completion of the New Lease

Once the premium and terms have been agreed (either by negotiation or Tribunal determination), the new lease must be formally completed.

The statutory timetable requires completion to take place within four months of agreement or determination - establishing this date can be tricky in the rough and tumble of legal practice and an experienced leasehold solicitor is needed to ensure dates are firmly recorded.

The solicitors will deal with the drafting of the new lease, execution by both parties, payment of the premium on formal completion, and registration at the Land Registry.

Step 6: Registration at Land Registry

Timetable Overview

Why Getting the Timetable Right Matters

Missing a deadline can be disastrous. For example: If the landlord fails to serve a counter-notice, the leaseholder can ask the court to grant the lease on their terms. If the leaseholder fails to apply to the Tribunal within the six-month window, the claim is deemed withdrawn and costs are still payable to the freeholder.

A withdrawn claim means you cannot serve another Section 42 notice for 12 months, which could be very costly if your lease is running down.

The importance of the section 42 notice

Serving the Section 42 notice is a significant milestone, but it’s only the beginning of a tightly regulated process. What follows is a series of statutory steps, strict deadlines, and negotiations that ultimately lead to the grant of a new lease.

At Peppercorn Law, we specialise in guiding leaseholders through this process from start to finish. Having acted in hundreds of lease extensions, we know that preparation, negotiation, and attention to detail are key to achieving the best outcome.

If you are considering extending your lease, or you have already served a Section 42 notice and want advice on the next steps, feel free to contact us.