High Court Showdown: Freeholders Challenge Leasehold Reforms as Government Plans Next Steps
July 15, 2025 – The High Court today launched a critical four-day judicial review hearing, running through July 18, as a coalition of prominent freeholders challenges key provisions of the Leasehold and Freehold Reform Act 2024 (LAFRA). The claimants, representing nine major entities owning around 390,000 leasehold properties, argue that the reforms violate their rights under Article 1 of Protocol 1 (A1P1) to the European Convention on Human Rights (ECHR), which protects the peaceful enjoyment of possessions. With legal experts estimating a slim chance of success for the freeholders, attention also turns to the government’s next moves if the claims are dismissed, particularly whether the abolition of marriage value will be enacted swiftly or delayed by further consultation.
Overview of the Judicial Review
Enacted in May 2024 under former Conservative Housing Secretary Michael Gove, LAFRA aims to reduce costs and simplify processes for leaseholders extending leases or purchasing freeholds, affecting an estimated 4.5 million properties in England and Wales. The challenge targets three “enfranchisement measures”: the abolition of marriage value (a premium sharing the profit when leases fall below 80 years), a cap on ground rents at 0.1% of freehold value for valuation purposes, and the elimination of freeholders’ rights to recover reasonable legal and valuation fees during claims.
The claimants, including historic estates like Cadogan (with 300 years of London land ownership) and Grosvenor (linked to the Duke of Westminster), investment firms such as Long Harbour, Albanwise Wallace, ARC Group, and PGIM, and charities like John Lyon’s Charity and The Portal Trust assert these changes constitute an uncompensated deprivation or excessive control under A1P1. They project losses of £289 million to £404 million collectively, with government impact assessments suggesting up to £1.9 billion over a decade. The government defends the Act as a necessary step to address inequities, arguing it strikes a fair balance under ECHR standards.
Leaseholder campaigners, denied intervention in May 2025, criticise the challenge as a delay tactic by “rich vested interests.” Stories like that of Phil Jones, a 57-year-old from Westcliff-on-Sea trapped by a doubling ground rent of £500 annually that renders his flat unsellable, highlight the human stakes. Permission for the review was granted in January 2025, with the court deeming the case “arguable” under human rights law. As the hearing began at 10:30 AM today, claimants emphasised financial impacts, while the government underscored public interest.
Strengths of the Claimants’ Arguments
The freeholders’ case rests on A1P1’s three rules: peaceful enjoyment of possessions, deprivation only in the public interest with safeguards, and control of property use for societal benefit. They argue the reforms disproportionately interfere with their economic interests, ground rents, marriage value premiums, and cost recovery rights, without adequate compensation.
A key strength is the detailed financial evidence presented, documenting significant revenue losses. The abolition of marriage value, for instance, eliminates a 50% share of the profit from uniting interests, a major income source for short leases. Charities add a compelling dimension: John Lyon’s Charity, which funds programs for underprivileged children, projects a 10% income drop, potentially jeopardising educational, mental health, arts, and youth initiatives. Dr. Lynne Guyton, the charity’s CEO, warned, “This reform pulls the rug out from underneath those who need the most support.” This angle suggests “unintended consequences,” such as wealth transfers to affluent leaseholder-landlords in central London, which could challenge the reforms’ proportionality.
Barrister Douglas Maxwell notes the “arguable” case established at permission stage, pointing to procedural flaws like insufficient consultation on valuation rates. Precedents like Vistiņš and Perepjolkins v Latvia (2012) support claims where interference harms public goods, and the claimants leverage “legitimate expectations” from decades of statutory norms (e.g., the 1993 Leasehold Reform Act). If the court finds the reforms arbitrary or overly burdensome, a declaration of incompatibility could follow.
Weaknesses of the Claimants’ Arguments
The case faces significant obstacles under A1P1, a qualified right allowing interference if lawful, in the public interest, and proportionate. Courts grant states a “wide margin of appreciation” in socio-economic policies, deferring unless measures are “manifestly without reasonable foundation.”
Key precedents undermine the claimants. In James v UK (1986), the ECtHR upheld the 1967 Leasehold Reform Act, allowing below-market freehold purchases as proportionate for housing equity. Professor Susan Bright calls this “directly analogous,” noting the Act’s roots in Law Commission recommendations and cross-party support. Mellacher v Austria (1989) validated rent controls slashing incomes by 80% without compensation, while Lithgow v UK (1986) permitted sub-market payments in social reforms. Recent UK cases, like Annington Property Ltd v Secretary of State (2023), prioritised public housing needs over private losses.
Barrister Liam Spender emphasises the challenge of proving an “excessive burden,” as freeholders retain recalculated premiums and have historically profited from the system. Leaseholder narratives, though absent from court, highlight countervailing hardships, like unsellable properties due to lender restrictions, weakening claims of one-sided harm. Even a win would yield only a non-binding declaration under the Human Rights Act 1998, leaving Parliament to decide amendments.
Probability of Success and Potential Outcomes
Analysts estimate a 25-35% chance of claimant success, based on A1P1 win rates (20-30% in socio-economic challenges at ECtHR and UK courts). Spender notes freeholders “have lost every time” in similar post-1967 disputes, while Maxwell sees an uphill battle despite the case’s arguability. Potential outcomes include:
- Full Success (~10%): All provisions declared incompatible, prompting parliamentary revisions and delays.
- Partial Success (15-25%): Limited wins, such as charity exemptions or cost recovery reinstatement.
- Full Failure (65-75%): Dismissal, enabling implementation via secondary legislation.
Judgment is expected 6-8 weeks post-hearing, likely between late August and mid-September 2025, per Administrative Court norms for reserved judgments in complex cases. This timeline accounts for drafting, party reviews for corrections, and potential summer scheduling delays. Appeals to the Court of Appeal could push resolution into 2026, prolonging uncertainty for stakeholders.
Post-Dismissal Implementation: Marriage Value Abolition Timeline
If the claims are dismissed, the government could proceed with the marriage value abolition, but immediate commencement, within weeks, is improbable due to procedural requirements. The provision, alongside the ground rent cap, relies on secondary legislation to set standardised deferment and capitalisation rates for premium calculations. Without these, the reforms cannot take effect.
The Labour government has delayed full timelines pending the case, with Deputy Prime Minister Angela Rayner stressing a “robust defense.” A planned consultation on these rates, slated for summer 2025, is critical to gather stakeholder input and ensure fairness, as recommended by the Law Commission. Typically lasting 8-12 weeks, this could conclude by autumn 2025 if launched concurrently with the hearing. Recent LAFRA consultations (e.g., service charges, closing September 26, 2025) suggest regulations follow within months. Thus, commencement could occur by late 2025 or early 2026, aligning with the government’s aim to act “as quickly as possible” while avoiding legal risks.
Other LAFRA provisions, like removing the two-year ownership rule (January 31, 2025), proceeded after minimal consultation, but valuation reforms’ complexity demands broader engagement. Skipping consultation risks further challenges, so expect a sequenced approach, with implementation by year-end 2025 at the earliest, potentially extending into early 2026 if delays arise.
Day-by-Day Analysis of the LAFRA Judicial Review: Key Arguments and Developments
The High Court judicial review challenging the Leasehold and Freehold Reform Act 2024 (LAFRA) concluded on July 18, 2025, after four days of intense arguments. Freeholders, representing interests in approximately 400,000 leasehold properties, contended that LAFRA’s provisions violate their rights under Article 1 of Protocol 1 (A1P1) of the European Convention on Human Rights. The hearing, presided over by Lord Justice Holgate and Mr Justice Foxton, saw robust exchanges, with judges expressing skepticism toward the claimants’ case. Below is a detailed day-by-day breakdown of the key points, drawn from firsthand accounts and legal commentary.
Day 1: July 15, 2025 – Freeholders Face Early Skepticism
The hearing opened in a packed Court 76 at the Royal Courts of Justice, with an overflow room and remote viewing for over 70 participants, including 22 barristers (10 King’s Counsel) and numerous solicitors. The claimants, including estates like Cadogan and Grosvenor, investment firms, and charities such as John Lyon’s Charity, argued that LAFRA’s abolition of marriage value, ground rent cap at 0.1% of freehold value, and removal of cost recovery rights infringe their A1P1 protections.
Lord Justice Holgate set the tone, emphasising that the case concerns all of England and Wales, not just prime London properties. He ruled on evidence applications, admitting most but rejecting a late expert report from Albanwise Wallace and a second statement from solicitor Damian Greenish for straying into legal arguments. He also raised the “ab ante” challenge issue, suggesting a stricter legal standard since LAFRA is not yet fully in force, requiring proof of near-universal rights infringement.
Victoria Wakefield KC (for Albanwise Wallace) argued that LAFRA disproportionately benefits buy-to-let investors over owner-occupiers, missing its aim. The judges questioned this, noting no residency requirement exists for lease extensions and that investors also face service charge obligations. Monica Carrs-Frisk KC (for ARC Time, GRIF, PGIM) cited European case law, arguing that near-full market value compensation is required for property expropriation. She claimed LAFRA’s measures fail this, especially as ground rents above 0.1% are not inherently harmful. Holgate doubted whether marriage value is a protected “possession,” noting its statutory origin in 1993, and questioned its relevance to cases like Lindheim and Karibu, which involved different property contexts.
Stephen Jourdan KC (for Long Harbour) began explaining marriage value but faced technical questions from Mr Justice Foxton on lease term valuations. Holgate dismissed the freeholders’ analogy of marriage value to “two Chinese vases,” highlighting the unique dynamics of leases as wasting assets. The judges’ unsympathetic interventions and request to shorten valuation arguments signaled a challenging start for the claimants.
Day 2: July 16, 2025 – Technical Arguments and Charity Concerns
With Court 76 still crowded and air conditioning issues prompting relaxed dress codes, the freeholders continued their case. Stephen Jourdan KC resumed, arguing that marriage value, recognised in the 1967 and 1993 Acts, underpins commercial transactions tied to pension liabilities. He claimed its removal is a property deprivation. The judges pressed for pension fund impact data, which Jourdan couldn’t provide, and Holgate questioned why compensation below market value wouldn’t suffice, citing legal standards requiring only a “reasonable relation” to value.
James Maurici KC (for Cadogan/Grosvenor) criticised the government’s impact assessment, alleging it underestimated losses (claiming £4 billion vs. £2 billion) and was “irrational.” He proposed “grandfathering” existing short leases to preserve marriage value, affecting only 8% of leases, mostly in London. Holgate grew frustrated when Maurici veered off-topic, demanding focused evidence. Maurici conceded uncertainties in cost-benefit calculations but argued LAFRA unfairly burdens freeholders for minimal societal gain (£90 million).
Edward Fitzgerald KC (for John Lyon’s Charity) argued that LAFRA harms its St John’s Wood estate, where half the leaseholders are investors, diverting funds from children’s programs. Holgate countered that the charity could invest elsewhere, as its beneficiaries are geographically defined, not tied to specific properties. Martin Westgate KC (for The Portal Trust) claimed losses from potential lease extensions by Sanctuary Housing, but the judges questioned whether Sanctuary could exercise such rights. Both judges showed limited sympathy for the charities’ exemption pleas, though their silence during parts of these arguments left room for speculation.
Day 3: July 17, 2025 – Government Defense Begins
The third day saw the freeholders wrap up their arguments before the government’s defense. Martin Westgate KC reiterated that LAFRA’s broad application aids investors unnecessarily, citing the 2022 Ground Rents Act as better-targeted. Holgate dismissed bad drafting or statutory inconsistency as grounds for illegality, focusing on proportionality.
James Maurici KC repeated calls for grandfathering, while Victoria Wakefield KC argued that deferment and capitalisation rates aren’t needed to assess LAFRA’s legality, as its overall impact is disproportionate. Holgate curtailed her rate explanations, indicating familiarity with valuation principles.
Sir James Eadie KC, a seasoned Human Rights Act litigator, opened the government’s defense, arguing LAFRA’s proportionality under the Bank Mellat test: its aims (simplifying lease extensions) are vital, rationally connected, minimally intrusive, and balanced against freeholder rights. He framed LAFRA as a control of use, not expropriation, citing tobacco packaging and immigration cases. The Law Commission’s extensive work rejected alternatives like grandfathering for complexity. Holgate called LAFRA “quintessentially political,” noting limited European guidance due to England’s unique leasehold system, and agreed Parliament’s discretion is broad.
Day 4: July 18, 2025 – Government Concludes, Freeholders Reply
The final day saw the government complete its case, with Sir James Eadie KC rebutting Lindheim and Karibu as inapplicable, emphasising LAFRA balances private interests, not public vs. private. Mark Loveday, a leasehold specialist, traced marriage value’s history, noting its absence in the 1967 Act and judicial introduction post-1974, aligning LAFRA’s reforms with original intent. Richard Moules KC defended the impact assessment, admitting April 2025 corrections but arguing Parliament was informed of the wealth transfer and acted within its discretion. He rejected exemptions for simplicity, noting the National Trust’s unique inalienability status doesn’t apply to other charities.
In reply, Victoria Wakefield KC reiterated LAFRA’s lack of nuance, while Monica Carrs-Frisk KC argued the 0.1% ground rent cap lacks social justification. Stephen Jourdan KC highlighted losses for leaseholders who previously paid marriage value, and James Maurici KC called the impact assessment “irrational.” Edward Fitzgerald KC and Martin Westgate KC pressed for charity exemptions. The judges made few interventions during the reply, reserving judgment without a set date.
Post-Hearing Outlook
Judgment is expected in 6-8 weeks, likely late August to mid-September 2025, though the High Court’s summer vacation (August 1–September 30) could delay it further. The judges’ consistent skepticism questioning marriage value as a “possession,” dismissing European precedents, and emphasising parliamentary discretion suggests a tough road for the freeholders. Their failure to quantify pension fund impacts weakened a key claim. However, the packed courtroom and leaseholder frustration, voiced online, underscore the case’s stakes. Freeholders hinted at appealing if unsuccessful, potentially extending delays into 2026.