Vesting Order - Failing to provide a counter notice
(Last Updated: 22/07/2022)
22/07/2022
19
8 min read
A vesting order can be granted by the county court in cases where a freeholder (landlord)
- fails or refuses to serve a Section 21 Counter-Notice in response to a Section 13 Notice served by eligible leaseholders exercising their right to purchase their freehold - OR - Section 45 Counter-Notice in response to a Section 42 Notice served by an eligible leaseholder exercising their right to extend their lease; or
- is absent whether buying the freehold or extending the lease.
If the order is granted then the court will take over responsibility of the freeholder and grant the new lease following the statutory process.
The vesting order process is different if you have an absent landlord so click here to find out more - What to do when you have an absent landlord.
Although there are more costs to pay upfront to obtain a vesting order there are some upsides:
- you can often get the lease extension for a lower premium; and
- the costs you spend in getting the order can often be deducted from the premium.
In this article we run through the additional costs of an order when a freeholder fails to respond to a section 42 notice, what costs can be claimed back and what your solicitor needs to do. If your solicitor doesn't offer the vesting order service then please call us and we will help on 0333 344 3234 (local call charges apply).
Can you get a vesting order if you are informally extending your lease?
You can only get a court order if you are extending your lease using the statutory process. Click to read what you can do if your freeholder fails or refuses to reply to your offer under an informal lease extension.
What does the law say about vesting orders?
Under the Trustees Act 1925: Part IV - Vesting Orders, in relation to the freeholder's obligation to send a counter notice, it states:
"...(vi) Where a trustee jointly or solely entitled to or possessed of any interest in land, or entitled to a contingent right therein, has been required, by or on behalf of a person entitled to require a conveyance of the land or interest or a release of the right, to convey the land or interest or to release the right, and has wilfully refused or neglected to convey the land or interest or release the right for twenty-eight days after the date of the requirement "
"...the court may make an order (in this Act called a vesting order) vesting the land or interest therein in any such person in any such manner and for any such estate or interest as the court may direct, or releasing or disposing of the contingent right to such person as the court may direct"
What is the Vesting Order Process?
The vesting order process varies based on whether your freeholder is absent or they are simply not responding. The key difference is that when the freeholder is proven absent, you don't serve the tenant notice (section 42 notice for a lease extension or a Section 5 Notice for a purchase of freehold).
As you see from the law above, if the freeholder "wilfully refused or neglected to convey" then you can make an application to the county court, however here is the process up to this point:
- 1
Check your eligibility to extend your lease under the Leasehold Reform Act's statutory process (click to find out if you are an eligible leaseholder)
- 2
Get a RICS valuation to estimate accurately what the reasonable cost that the lease extension premium should be
- 3
Instruct a solicitor to serve the section 42 notice on the Freeholder(Landlord). This is also called the Tenants's Notice, and from the point of serving the notice the freeholder has:
- 21 days (not working days) to request evidence of your right to a formal lease extension
- Not less than (but potentially longer), 2 months to respond with a Section 45 - Counter Notice
You can read the full lease extension process by clicking here.
Does the Freeholder always have 2 months to send their Counter Notice?
The statutory lease extension process requires the freeholder to respond to a section 42 notice (the ‘Tenant’s notice’) within 2 months of the date of the notice. Although this could be longer than 2 months depending on what date was included within the Section 42 notice as it states in the Leasehold Reform, Housing and Urban Development Act 1993 Part I Chapter II The Tenant's Notice Section 42: "The date specified in the tenant’s notice in pursuance of subsection (3)(f) must be a date falling not less than two months after the date of the giving of the notice". You should check the date for your Freeholder to reply by within your own notice before making an application to court for a vesting order.
How do you prove a notice has been served?
The Notice is legally served as long as it can be proved that the freeholder has received it. Many Freeholders will argue that they never received the section 42 notice and as such the time period set out within the notice never started. To avoid this situation, solicitors should never send the Tenant's Notice first or second class post and should look to send it via either:
- Special Delivery - the evidence of who signed for the notice can be provided at court;
- Courier - evidence of who signed for the notice and the witness statement of the courier can be provided at court; or
- Hand Delivery - evidence of the witness statement of the deliverer can be provided at court.
What happens if the freeholder doesn't respond within 2 months?
The Leasehold Reform, Housing and Urban Development Act 1993 Part I Chapter II Applications to court or leasehold valuation tribunal Section 49 states: (1)Where the tenant’s notice has been given in accordance with section 42 but— (a)the landlord has failed to give the tenant a counter-notice in accordance with section 45(1) , or (b)if required to give a further counter-notice to the tenant by or by virtue of section 46(4) or section 47(4) or (5), the landlord has failed to comply with that requirement, the court may, on the application of the tenant, make an order determining, in accordance with the proposals contained in the tenant’s notice, the terms of acquisition.
Put into layman's terms, if the freeholder hasn't sent their section 45 notice within the time set in the Section 42 notice (plus the additional 28 days required under the Trustees Act 1925) then you can look to make an application to the County Court to get an order so that the court can reply to the tenant's notice.
What is the process to apply for a vesting order?
- Send the new lease to the Freeholder for signing - it is advisable to write to the Landlord first to provide them with an opportunity to sign the new lease before making the court application.
- Check the Section 42 Notice was served correctly - if you have not served the section 42 notice correctly then your court case might be thrown out leading to further delays and increased costs (and these may not be reclaimable)
- Check the leaseholder is eligible to extend the lease - (even though this should have been done before you serve the notice). Similar to serving the notice incorrectly, if you are not legally eligible to extend your lease then you cannot get an order. (click to find out if you are an eligible leaseholder)
- Send an application to the county court for a vesting order (including the court's fee)
- Court date is set (if the Judge doesn't make a ruling without a date)
- Counsel attends court and puts forward the case for the Claimant (leaseholder)
- Following the court order there would be the usual conveyancing to draft/agree the new lease and arrange for Court to sign the new lease if the Landlord refused - you can read more about what happens after the premium is agreed by the freeholder and leaseholder by clicking here.
What is the cost of applying for a vesting order?
Although the costs for the application to court only vary slightly depending on the court's fees, the solicitor and counsel costs will vary more considerably depending on if the Freeholder defends their case at court. For an undefended case a solicitor's fee for the application for an order is around £1,620 INC VAT plus the third party costs listed below. For a defended claim the solicitor and counsel costs could be more to handle the work required for replying to the Freeholder's reasons for not serving the Section 45 in time.
Third party disbursements (costs) | |
Court Application Fee | £300 Estimated - Court fees vary depending on the court |
Counsel's fees Your solicitor instructs Counsel to represent you at court | £720 INC VAT Estimated - Based on an undefended claim |
What costs can be reclaimed from the Freeholder?
If you successfully obtain the order, your Counsel will ask the Court to deduct your third party costs, legal and counsel's fees from any premium payable to extend the lease. In most circumstances the court will order this unless there is a clear reason not to.
For example, let's say the premium to extend your lease is £20,000 and the costs incurred during the vesting order were £2,000. As long as you were successful in offsetting all your costs, then the premium you'd have to pay would be £18,000.
Do you need help?
This is a very complex area of law and requires a specialist in lease extensions to support your court application. We can help you with our specialist lease extension solicitors who will run through the whole process with you. To get a quote or to ask a question please feel free to call us on 0333 344 3234 (local call charges apply).
Written by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Reviewed by:
Caragh Bailey
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
