What is a Section 45 Notice?
In the statutory lease extension process under the Leasehold Reform, Housing and Urban Development Act 1993 (LRHUDA 1993), the Section 45 notice (often called a "counter-notice") is the official response your landlord gives when you request to extend your lease. It clearly sets out the landlord’s stance on your lease extension request, including the premium (price) and any proposed lease terms.
What's in a Section 45 Notice?
When your landlord issues a Section 45 notice, they must specifically address:
- Whether they accept your legal right to extend the lease.
- Their proposed premium (cost) for the extension.
- Any terms or conditions they want included in your new lease.
Accepting or Rejecting Your Right
The first key point in the Section 45 notice is whether your landlord accepts or rejects your legal right to a lease extension:
- Accepting: This means the landlord acknowledges your eligibility. Once accepted, your entitlement can't be withdrawn, and the discussion moves onto negotiating the premium and lease terms.
- Rejecting: If the landlord disputes your eligibility (which is rare), they must clearly state their reasons. Common grounds might be that the notice was not validly served on all of the relevant parties or issues with the lease itself or their role as a landlord. If this happens, you may need to escalate the case to court.
Premium Counter Offer
In the Section 42 notice the leaseholder is required to make a reasonable offer. The landlord will respond back with their higher counter proposal in the Section 45 notice. Usually their counter-offer will be significantly higher than what the actual premium should be. It is then down to negotiation of the premium by each side. Given most freeholders have a commercial interest they will be negotiating for the highest possible premium and the leaseholder for the lowest possible premium.. If agreement can not be reached it is down to the leaseholder to escalate the case to tribunal to independently determine the premium.
Changes to Lease Terms
Typically, your new lease should closely follow your existing lease terms, except for the following changes:
- Add an extra 90 years added on top of your current lease length.
- The ground rent is reduced to a "peppercorn" (effectively zero).
- Modernisation to account for the passage of time since the original lease being drafted (which can often be 50+ years ago)
- Any errors or inconsistencies in the original lease which can be resolved (for example missing pages or inaccurate plans)
Outside of these general categories landlords have limited power to introduce entirely new, unrelated, or unreasonable terms. However that does not necessarily stop them trying as once a lease is extended they have very little financial incentive in the property, but are liable for fufilling the role of freehodler for the next 90+ years.
Important Deadlines
Timelines are extremely important in the lease extension process:
- Landlord’s response: Your landlord must serve the Section 45 notice by the deadline stated in the Section 42 notice (which is typically 2 months plus a few days). If they miss this deadline, your proposed terms become binding, significantly strengthening your position.
- Negotiation period: After receiving the counter-notice, both sides typically have up to six months to negotiate terms and the premium. If agreement isn't reached within this timeframe it is down to the leaseholder to take the case to tribunal.
Why Is It Called a "Section 45 Notice"?
The notice is called a "Section 45 Notice" simply because it is defined under Section 45 of the Leasehold Reform, Housing and Urban Development Act 1993. This part of the Act specifies exactly what the landlord must include in their formal response, hence the shorthand name.
