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Leasehold Extension Section 45 Counter Notice - What happens next?

01/09/2018

During the formal lease extension process a section 45 notice is served by a landlord on the tenant (leaseholder) in response to their section 42 notice. In the leaseholder's section 42 notice, they confirm the premium they wish to pay the freeholder to extend their lease by the statutory 90 years with a peppercorn ground rent (no ground rent).

What is included in a Section 45 Counter Notice?

Full name and address of the applicant leaseholder

Full name and address of the landlord

Landlord's declaration

If the applicant has the right to acquire a new lease under the Leasehold Reform, Housing and Urban Development Act 1993
Details of what the landlord accepts from the section 42 notice
Details of what the landlord doesn't accept from the section 42 notice
Details of the landlord's counter-notice to each point they don't accept
Details if the landlord intends to make an application for an order under section 47(1) of the Act on the grounds that he or she intends to redevelop premises in which the flat is contained

Download a section 45 notice template*

* You should instruct a solicitor to serve a counter notice. Call to get a fixed fee quote on 0333 344 3234 (local call charges apply)

What happens after the counter notice is served?

The counter notice will either agree tot he premium and the terms of the section 42 notice, or decline the terms and put forward a counter offer. If the terms are agreed then you follow the standard lease extension conveyancing which you can read by clicking here.

We run through in the article below what happens when your freeholder doesn't accept the premium offered in a section 42 notice.

Do you need help with a lease extension?

We can act for either the leaseholder or freeholder for a lease extension and our costs are competitive. You can call us to discuss your case on 0333 344 3234 (local call cahregs apply) or click the button below to organise a fixed fee quote.

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What is a lease extension?

The following is a very simple summary of the statutory lease extension process:

Leaseholder serves a Section 42 notice on the Landlord
Landlord (freeholder) confirms the leaseholder has the legal right to extend their lease through the statutory process
Landlord serves a section 45 notice on the leaseholder
(if not agreed) Negotiations on the premium and potentially Tribunal if parties can't agree
Landlord drafts new lease and leaseholder completes

Click to read the full lease extension process

What happens if your landlord rejects your offer?

The main reason for your landlord to reject your offer is the lease extension premium offered. The premium should always be calculated by a RICS valuer that specialises in lease extensions. Some of the reasons for there to be an issue over the premium are:

leaseholder didn't use a RICS valuer - either choosing a desktop valuer or using an online calculator
leaseholder didn't put forward a reasonable offer - often starting too low
landlord didn't use a RICS valuer
landlord didn't put forward a reasonable counter offer

When the leaseholder and landlord can't agree on the premium then both parties should instruct their respective RICS valuers to discuss how they calculated their premium and look to discuss where there may be errors or areas of disagreement.

The leaseholder has 6 months from the date of the counter notice to come to an agreement with the freeholder, however they shouldn't allow matters to run close to this date as an application to the Tribunal must be lodged before the 6 months ends, otherwise you miss the statutory time limit and will need to start over in 12 months' time.

Top tip: Weigh up the costs of negotiating with the landlord

Where the difference between the landlord's and leaseholders is in excess of £5,000, then spending money on negotiating is advisable. A RICS valuer's charge varies from £150 EXC VAT to £300 EXC VAT per hour. Costs can run to in excess of the difference between the premiums so make sure to balance the cost against the saving.

If your case cannot be resolved then you will need to go to the Tribunal to get the value of the premium resolved. If you are successful in your case then your costs for attending the Tribunal can often be deducted from the premium payable to the landlord, however this isn't always the case which is something else to weigh up before going to the Tribunal. If you need help then please give us a call on 0333 344 3234 (local call charges apply).