Section 42 Notice

After the surveyor has calculated the premium, your solicitor will draft an Offer Notice under Section 42 of the Leasehold Reform and Urban Development Act 1993.

It is crucial to instruct an experienced solicitor with expertise in drafting these notices as errors at this stage can lead to dire consequences further down the line.

Indeed if the offer notice was later deemed invalid, you would have to serve a new notice and incur extra legal fees. Once a notice is served on the landlord, moreover, you are liable for their reasonable legal and valuation fees. If the notice was served then deemed invalid and withdrawn, therefore, you would have to pay the landlord’s costs up to the point of withdrawal even though the offer notice was ineffectual.

Even more worryingly, in certain circumstances errors in the initial notice can lead to a significantly higher premium. Once your lease runs below 80 years, for instance, you will incur marriage value (half the increase in the value of the property as a result of the lease extension). It is vital to serve an offer notice before the lease reaches 80 years because the valuation date is frozen when the Section 42 Notice is served on the landlord, which means that you would avoid paying marriage value. But if that offer notice was deemed invalid, you would need to wait 12 months from the date of the original offer notice before you could serve another one. By this time your lease may have fallen below 80 years and the cost of extending the lease would have spiraled, so it’s crucial to get it right first time.

In order to be deemed valid the offer notice must detail certain things:

  • Name and address of the landlord
  • Name and address of the tenant
  • Who the Landlord can send correspondence to (usually the tenant’s solicitors)
  • Proposals for the terms of the new lease i.e. 90 years added to the lease, peppercorn ground rent and the premium amount offered
  • Deadline for landlord to serve Counter Notice (this cannot be less than two months from the date the offer notice was served)

Until the recent Leasehold Reform (Amendment) Act 2014, notices had to be personally signed by the tenant. Now it is possible for your solicitor to sign on your behalf, provided you have expressly given them the authority to do so.

It is important for the notice to be drafted in accordance with the Act. If there is no counter notice and the claim is valid, the tenant may proceed with the offer terms (as in the case of Willingale v Globalgrange Ltd [2002] 2 EGLR 55 CA). Therefore both the terms and the premium amount must be functional under the requirements of the legislation.

While there is a saving provision under Schedule 9(1) of the 1993 Act to the effect that the notice shall not be invalidated by any inaccuracy in any of the particulars, this only assists in reference to elements such as the details of the tenant’s lease. It does not assist if any of the principle elements are flawed or inaccurate.

Once the offer notice is drafted, it also needs to be properly served on the landlord, as well as any third party to the lease (such as a management company). If it is not served, there can be an argument that it does not need to be dealt with.

The method of service and what can be construed as the landlord’s address is another subject of much contention in case law. The legislation sets up principles enabling you to rely on what you know as the landlord’s address under Section 47 Landlord & Tenant 1987.

This is the address you were sent in a notice from the landlord, which is also the address that should appear on any service charge or ground rent demands you receive. If the landlord is a company, the notice should be served on it’s registered office address. This is due to the case of Beitov Properties Ltd v Elliston Martin [2012] UKUT 133 (LC), which states that a landlord cannot use an agent’s address for it’s Section 47 address.

Written by Simon Masters

Senior Associate Solicitor