Workshop: Handling a section 42 notice of claim

The tenant's right to acquire a new long lease has been set in stone for many years. However, the processes for exercising that right have been subject to modification in recent times, in particular the issuing of a notice of claim under section 42 of the Leasehold Reform, Housing and Urban Development Act 1993, whereby a tenant applies to a landlord for a lease extension.

Before drafting your notice you should ensure that the tenant first qualifies for the right; that is, that the lease is a long lease, the landlord must not be a charitable housing trust and, the lease must not be a business tenancy.

The notice must contain details of the property, the landlord and the tenant. In addition, the notice will include details of the lease under which the property is held and include the tenant's offer for a premium and other terms for the new lease.

The new lease will be for a term which is equal to the unexpired term of the existing lease plus 90 years and the rent will be a peppercorn while all the other terms will remain as in the existing lease.

Once the notice is served, the tenant can sell the lease with the benefit of the right. The notice is registerable against the landlord as a land charge and a notice can be entered against the landlord's title. It is important to note that a notice will be void against a purchaser of the freehold reversionary interest if it has not been registered at the land registry. If the notice is void, then this means that it is deemed to have never been served. This is an important point as if the notice is withdrawn, the tenant is precluded from making another claim for 12 months; but, if the notice is void there is no reason why the tenant cannot make another claim immediately.

In the case of Midland Bank Trust Company limited v Green [1981] AC 513 a father granted his son an option to purchase his farm. However, the option was not registered as an estate contract and following a family dispute the father decided he no longer wanted to allow his son to have the land. Therefore, the land was sold to the mother.

It was held that the option was void as against the mother, as purchaser, as on an interpretation of the Land Charges Act 1972, the mother was a purchaser for the purposes of section 4(6) and the House of Lords refused to imply into this piece of legislation any requirement for good faith or that the purchaser must provide valuable consideration.

If you apply this case to a notice of claim for a lease extension, then the same applies. Unless the notice is registered against the landlord, it will be void against any purchaser of the freehold reversion.

On a strict interpretation, this would also seem to apply even if the purchaser of the freehold knew the notice existed and had been served.

So, provided your notice is validly served and registered, the landlord will have two months in which to respond.