The High Court has today dismissed a judicial review brought by a group of major landlords challenging key provisions of the Leasehold and Freehold Reform Act 2024. The claimants, which included institutional investors, charitable trusts, and large estate owners such as Cadogan and Grosvenor, argued that reforms designed to make it easier and more affordable for leaseholders to purchase their freehold or extend their lease unlawfully infringed their property rights under Article 1 of the First Protocol of the European Convention on Human Rights.
Lord Justice Holgate and Mr Justice Foxton, sitting in the Divisional Court, unanimously rejected these claims, finding that the legislation pursues a legitimate aim and strikes a fair balance between the rights of landlords and leaseholders.
Background to the Challenge
The Leasehold and Freehold Reform Act 2024 represents the latest chapter in the UK Government’s long-running efforts to address the structural unfairness of the leasehold system. A form of ownership where occupiers pay a premium to acquire a long lease yet watch its value diminish over time, while continuing to pay ground rent and service charges.
The claimants challenged three key aspects of the reforms:
- The Ground Rent Cap – limiting the ground rent used in valuation calculations to 0.1% of the freehold vacant possession value;
- The Marriage Value Reform – abolishing the requirement for tenants to pay landlords 50% of the “marriage value” when extending or buying their lease; and
- The Costs Recovery Reform – ending the tenant’s obligation to cover the landlord’s non-litigation costs, such as valuation and conveyancing fees.
The landlords argued that these changes significantly devalue their investments and amount to an unjust interference with their possessions under Article 1.
The Court’s Decision
The High Court dismissed all six applications for judicial review, holding that the measures in question serve a legitimate public purpose: to “address the unfairness of the leasehold system” and make enfranchisement “cheaper and easier” for long leaseholders.
The Court found that:
- The Ground Rent Cap was supported by sufficient evidence and did not prevent landlords from receiving compensation reasonably related to market value.
- The Marriage Value Reform was proportionate and justified, aiming to redress the imbalance between landlords and leaseholders and reflecting the inherently wasting nature of leasehold interests.
- The Costs Recovery Reform fell well within Parliament’s discretion and achieved a fair balance between the interests of both parties.
The judges noted that Parliament was entitled to reform the law in this way to correct longstanding inequities and that the measures were rationally connected to those aims. In doing so, the Court drew parallels with the James v UK (1986) decision of the European Court of Human Rights, which similarly upheld earlier leasehold reform legislation against a human rights challenge.
Significance of the Ruling
The judgment provides strong judicial endorsement for the Government’s ongoing programme of leasehold reform. It reinforces Parliament’s wide margin of appreciation in legislating to address perceived social and economic injustices in property law.
For landlords and institutional investors, the ruling confirms that future enfranchisement claims will proceed under the new, more tenant-friendly valuation framework. For leaseholders, the decision paves the way for more accessible and affordable routes to acquiring freehold ownership or securing long lease extensions.
DTM Legal Comment
This ruling marks a decisive moment in the evolution of leasehold reform. The High Court’s decision underscores the judiciary’s deference to Parliament’s social policy objectives and the ongoing shift toward rebalancing rights between landlords and long-term occupiers.
Our Property Litigation and Real Estate teams advise clients on how the Leasehold and Freehold Reform Act 2024 affects their portfolios and enfranchisement rights. If you require further advice, please contact our Property Litigation or Commercial Property teams.
