Statutory Lease Extension: Served With a Section 42 Notice
A leaseholder has claimed a lease extension. You have a limited window to respond, and the premium proposed is rarely the premium payable.
Your reasonable costs are usually recoverable*
*Limited to investigating title, valuation for the claim and conveyancing. Negotiation costs are not recoverable, and at tribunal each side bears its own.
In short
What is a Section 42 notice?
A Section 42 notice is a leaseholder’s formal claim to extend the lease of their flat under the Leasehold Reform, Housing and Urban Development Act 1993. It proposes a premium and requires the freeholder to serve a counter-notice within a statutory period.
What must a freeholder do on receiving one?
The freeholder must serve a counter-notice by the date specified in the notice, admitting or disputing the claim and stating their own proposed premium. Missing the deadline can result in the lease being granted on the leaseholder’s proposed terms.
Who pays the freeholder’s costs?
Under the current law the leaseholder is liable for the freeholder’s reasonable valuation and legal costs in connection with the claim. The Leasehold and Freehold Reform Act 2024 provides for the removal of this entitlement, but that provision is not yet in force.
How is the premium calculated?
The premium comprises the diminution in the value of the freeholder’s reversion, the capitalised value of the ground rent, marriage value where the unexpired term is below 80 years, and any development value.
What a Section 42 notice means
A Section 42 notice is a leaseholder’s formal claim to extend their lease under the Leasehold Reform, Housing and Urban Development Act 1993. Where the leaseholder qualifies, it is not a request but the exercise of a statutory right.
It also starts a clock. You have a defined period in which to serve a counter-notice, and the consequences of missing it are serious: the lease can be granted on the terms the leaseholder proposed, at the premium they proposed.
The notice will set out a proposed premium and the terms sought — 90 years on top of the existing term at a peppercorn ground rent. In our experience the figure proposed is frequently well below what a tribunal would determine.
Your counter-notice under Section 45
Your response is a counter-notice under section 45 of the 1993 Act. In it you admit or dispute the leaseholder’s right to a new lease, and where you admit it, state the premium and terms you propose.
It must be served by the date specified in the leaseholder’s notice, which is usually two months from the date the section 42 notice was given. The date is set by the leaseholder within the statutory parameters, so it should be diarised from the moment the notice arrives rather than assumed.
If the deadline is missed
The consequences are serious. Where no counter-notice is served in time, the leaseholder may apply to the court for a new lease on the terms set out in their own notice — including the premium they proposed, which is invariably lower than the figure that would otherwise be agreed or determined. There is no discretion to extend the period.
Two further points make the counter-notice worth preparing properly. Your proposed premium anchors the negotiation that follows, and a figure advanced without supporting valuation evidence is difficult to defend. And the leaseholder’s notice may itself be defective — on qualification, on service, or on prescribed content — which is the first thing we test.
The statutory process, from the freeholder’s side
| Stage | What happens | Statutory timing | Typical elapsed |
|---|---|---|---|
| Section 42 notice served | The leaseholder’s claim. Sets out the proposed premium, the terms sought and the date by which your counter-notice must be served. | Valuation date is fixed on this date | Day 0 |
| Deduce title and provide information | You may require the leaseholder to deduce title, and they may require information from you. A deposit may also be required. | Within 21 days of a request | Weeks 1–3 |
| Inspection and valuation | Your valuer inspects and prepares a valuation as at the valuation date, gathering comparable evidence contemporaneous with it. | — | Weeks 2–6 |
| Section 45 counter-notice | Admits or disputes the claim and states your proposed premium and terms. Missing this is the critical failure point. | By the date in the section 42 notice, usually two months | By month 2 |
| Negotiation | Conducted between the two valuers. Most claims settle here. Your costs of this stage are not recoverable. | — | Months 2–6 |
| Application to the tribunal | Either party may apply if terms are not agreed. Cannot be made earlier than two months, nor later than six months, after the counter-notice. | Between 2 and 6 months after the counter-notice | Months 4–8 |
| Determination and completion | The tribunal determines the premium and terms if not agreed. The new lease is then completed. | Completion follows within the statutory period | Months 6–14 |
Elapsed times are typical rather than prescribed. Statutory deadlines are shown separately and are not extendable by agreement in every case.
How the premium is assessed
The premium comprises four elements, and the rates applied to each are where most of the negotiation happens.
01
Diminution in the value of your reversion — what your interest is worth before the new lease is granted, and what it is worth afterwards. The reversion is deferred over a longer period, so its present value falls.
02
Loss of ground rent income — capitalised over the remaining term. The capitalisation rate applied is itself frequently in dispute and makes a material difference.
03
Marriage value — where the unexpired term is below 80 years, the increase in the combined value of the two interests is currently shared equally. Above 80 years it does not arise at all, which is why the threshold matters so much.
04
Development value — roof space, airspace or unused land. Frequently overlooked, occasionally the largest single element.
Where Blakes comes in
A leaseholder’s notice proposes a premium, and it is an opening position rather than a considered figure. Blakes inspects, gathers comparable evidence contemporaneous with the valuation date, and prepares a valuation capable of being defended. We then conduct the negotiation with the leaseholder’s surveyor, so that the premium ultimately paid reflects the correct value of what you are giving up — not the figure first put to you.
Statutory Lease Extension Premium Calculator
Calculated under Schedule 13 to the Leasehold Reform, Housing and Urban Development Act 1993
An indicative range for the premium on a statutory lease extension. The valuation date is fixed on the date the section 42 notice is served, so figures should be taken as at that date.
Indicative premium range
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Relativity is derived from a curve based on the Savills 2015 and Gerald Eve 2016 unenfranchiseable graphs. This calculator produces an indicative range only. It is not valuation advice and must not be relied upon in responding to a notice or in setting a counter-notice figure. Relativity, deferment and capitalisation rates are matters of professional judgement and vary by property, location and evidence. Development value, defective leases, unusual ground rent provisions and improvements are not accounted for. The opinion of a specialist RICS Registered Valuer should always be obtained.
Dealing with a collective claim instead? Use the collective enfranchisement calculator, or open this one on its own page.
Costs: what you can and cannot recover
Where a valid notice is served, the leaseholder is liable under the current law for your reasonable costs of investigating title and the leaseholder’s entitlement, of the valuation prepared for the purposes of the claim, and of the conveyancing on completion.
Two categories fall outside that. The cost of negotiating the premium is not recoverable and is borne by you whatever the outcome. And where either party refers the matter to the First-tier Tribunal for determination, each side bears its own representational costs — there is no general rule that the losing party pays.
That cost exposure cuts both ways, and it is a powerful discipline. Referrals to the tribunal are uncommon, and contested hearings rarer still, precisely because neither side recovers what it spends getting there. The great majority of claims settle by negotiation between the two surveyors.
We encourage and facilitate that. Where expectations on the other side are unreasonable a referral becomes unavoidable, and we will say so, set out the likely cost and the range of outcomes, and advise on the course producing the best commercial result rather than the most combative one.
The Leasehold and Freehold Reform Act 2024 provides for removal of the recoverable element altogether. That provision is not yet in force. More on where reform stands.
What we do
01
Review the notice
We check qualification, service and prescribed content before anything else, because a defective claim changes the whole position.
02
Inspect and value
A RICS Registered Valuer inspects, measures and gathers comparable evidence contemporaneous with the valuation date.
03
Prepare and serve the counter-notice
Drafted by Arcadia Law and served within the statutory deadline, with your figure properly evidenced.
04
Negotiate
Most claims settle. We negotiate with the leaseholder’s surveyor and agree terms.
05
Tribunal, if required
Where terms cannot be agreed, we prepare the evidence and represent you at the First-tier Tribunal.
Where we act
myfreehold is based in London and acts for freeholders across all 32 London boroughs and the City of London. We also act regularly for clients with property interests throughout England and Wales, including portfolio landlords holding buildings in several regions.
Section 42 claims turn on comparable evidence, and evidence is local. Where a property sits outside London we obtain and test local evidence rather than applying London assumptions to a market that behaves differently.
Common questions from freeholders
Can I refuse a lease extension claim?
Not where the leaseholder qualifies and the notice is valid. It is a statutory right. What you can do is test the validity of the notice, ensure the premium properly reflects what you are giving up, and negotiate the terms of the new lease.
What if the notice is defective?
A defective notice may be invalid, in which case the claim fails and cannot generally be repeated for twelve months. Defects arise on qualification, on service, and on the prescribed content. Testing validity is the first step, before any valuation work.
How long do I have to respond?
Your counter-notice must be served by the date specified in the leaseholder’s notice, which is usually two months from the date the section 42 notice was given. Missing it can allow the leaseholder to obtain a new lease on the terms they proposed.
Does the leaseholder need to have owned the flat for two years?
No. The two-year ownership requirement was removed with effect from 31 January 2025, so a leaseholder can now claim immediately on acquisition.
What premium should I propose in the counter-notice?
A figure supported by valuation evidence. It anchors the negotiation that follows, and an unrealistic figure invites a tribunal application which costs you money you cannot recover. Equally, a figure proposed without proper valuation concedes value unnecessarily.
Can I keep the ground rent?
Not under the statutory route, where the new lease is at a peppercorn. The capitalised value of the lost income forms part of the premium. If retaining an income stream matters to you, an informal lease extension agreed outside the Act is the route that allows it.
What is marriage value and when does it apply?
It is the increase in the combined value of the freehold and leasehold interests brought about by the new lease. It arises only where the unexpired term is below 80 years, and is currently shared equally between the parties. At 80 years or above it does not arise at all.
Is development value included?
It should be where it exists. Roof space, airspace and unused land can form part of the value of your interest, and it is frequently overlooked by a leaseholder’s valuer.
Will I have to attend a tribunal?
Rarely. Referrals are uncommon and contested hearings rarer still, because neither side recovers its costs of getting there. The great majority of claims settle by negotiation between the two valuers.
Will leasehold reform affect a claim served now?
No. Claims are determined under the law as it stands at the valuation date. The Leasehold and Freehold Reform Act 2024 changes the valuation basis, but the substantive provisions are not yet in force and are subject to a live legal challenge. See our page on leasehold reform.
Send us the notice
Tell us the property address and the date the notice was served. We will confirm your deadline, whether the claim is valid, and what the interest is worth — and confirm the position on costs before any work begins.
Make an enquiry
Valuation
Blakes Surveyors Ltd
Company no. 9184264
RICS regulated firm no. 752265
Legal
Arcadia Law Ltd
Company no. 10043933
SRA no. 629605
myfreehold is a joint enterprise between Blakes Surveyors Ltd, regulated by the Royal Institution of Chartered Surveyors, and Arcadia Law Ltd, authorised and regulated by the Solicitors Regulation Authority (SRA no. 629605). Both companies are registered in England and Wales.
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