Court of Appeal gives freeholders the go-ahead for round two of judicial review

Appeal likely to be heard in late 2026 or early 2027

Pennycook: all new laws will be in place by 2029, including measures being challenged

On 1 April 2026 the Court of Appeal gave permission to appeal to five groups of freeholders seeking to appeal their unsuccessful judicial review challenge to the Leasehold and Freehold Reform Act 2024

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By Liam Spender

The freeholders are challenging three measures as a breach of their human rights under Article 1, Protocol 1 of the European Convention on Human Rights (“A1P1”).

The three measures challenged are related to changes to the way the price for an extended lease or to buy the freehold are calculated.

The first is a cap on the amount of ground rent that can be used to calculate the price payable. The cap is 0.1% of the freehold vacant possession value. The second measure is the abolition of the requirement to pay 50% of the marriage value on a lease with less than 80 years to run. The third measure is the abolition of the requirement to pay the freeholder’s legal and surveying costs when extending a lease or buying the freehold.

The freeholders have raised seven legal arguments, known as grounds of appeal, against the Divisional Court’s decision. The Court of Appeal says it will hear argument on all seven grounds.

The freeholders lost their challenge to these measures in a hearing before the Divisional Court last year. On 24 October 2025 the Divisional Court gave a judgment dismissing the challenge on all grounds and finding that the measure were compatible with A1P1.

The three measures are included in the Leasehold and Freehold Reform Act 2024, but are not yet in legal effect.

On 24 March 2026 Matthew Pennycook MP told the Commons Housing, Communities and Local Government Select Committee that he intended to get on and implement these measures regardless of further litigation. Mr. Pennycook said that the “hard constraint” in implementing the measure is that there are errors in the wording of the legislation that had to be fixed by a new law before he can bring these measures into legal effect. The government has said it will defend these appeals.

The appeals are being brought by five claimant groups, all of whom are freeholders or have other types of investment in residential ground rents. Some of the claimant groups consist of more than one freeholder. There are five groups of eight ground rent investors involved in the appeals. Details of the appeals are as follows:

Case CA-2025-002928 is brought by Irish owned investment companies established and managed by Long Harbour. These Irish companies pay the ground rents they receive to Irish investment funds managed by M&G Asset Management.

Case CA-2025-002936 is brought by the Portal Trust, formerly known as Sir John Cass’s Foundation. The Portal Trust owns a housing estate in Hackney currently on long lease to Sanctuary Housing.

Case CA-2025-003045 is brought by Albanwise Wallace Group, which is ultimately beneficially owned by a trust for the benefit of Italian Count Luca Padulli di Vighignolo. Until March 2026 Companies House showed that shares in the companies within the Albanwise Wallace Group were ultimately owned by Perseverance Limited, a Gibraltar company. In March 2026 new declarations of the persons of significant control were filed showing the group is now controlled via a trust.

Case CA-2025-003051 is brought by the ARC Time Freehold Income Authorised Fund, the Ground Rents Income Fund and two funds run by American investment manager PGIM.

Case CA-2025-003146 is brought by the Cadogan and Grosvenor Estates. The Cadogan Estate is owned by the family trust of the Earl Cadogan. The Grosvenor Estate is owned by the family trust of the Duke of Westminster. Together they are two of the largest surviving private estates in Central London with extensive holdings in Chelsea and Mayfair.

The John Lyon’s Charity, which participated in the original judicial review challenge, is not seeking permission to appeal.

The appeals have been consolidated so that they will be managed and tried together. There will be one set of legal documents for all five landlord groups. It is currently unknown if the landlords will adopt

The Respondent to all of the appeals is the Secretary of State for Housing, Communities and Local Government.

Progress of the appeals can be tracked via the Court of Appeal Case Tracker at https://casetracker.justice.gov.uk, but this is not updated regularly.

The next step in the appeals is for a hearing to be listed. The government will also put in a written argument explaining why the appeal should be dismissed and the Divisional Court’s judgement upheld. A hearing can be expected in late 2026 or early 2027 depending on whether the case is expedited.

The appeal has no effect on the government’s promise to implement a cap on ground rents of £250 per year and to ban new leasehold flats. Both measures are yet to become law. If the freeholders succeed in their appeal then there is less likelihood that the measure to cap ground rents at £250 per year will go ahead.

Conversely, depending on the Court of Appeal’s reasoning on the A1P1 arguments in this case, if the government wins the appeal then it is more likely that the £250 ground rent cap will be found not to contravene the freeholders’ A1P1 rights.

So the freeholders have won?

No. Permission to appeal does not mean the freeholders have won anything. It means the Court of Appeal will hold a hearing, likely late in 2026 or early in 2027, to decide whether to allow the appeal. As explained below, it is rare for human rights challenges, particularly to Acts of Parliament, to succeed. There are only two examples of challenges of this nature succeeding in the last 25 years.

Why has the Court of Appeal allowed the appeal to go ahead?

The legal test for permission to bring a first appeal is set out in Civil Procedure Rule 52.6 and associated case law. To obtain permission to appeal it is necessary to show either that the appeal has a real prospect of success or that there is some other compelling reason to hear an appeal.

Applications for permission to appeal are made in writing and considered by a single judge. The grant of permission to appeal does not mean that an appeal is likely to succeed.

The real prospect of success test is understood as meaning that there is a realistic as opposed to a fanciful prospect of the appeal succeeding. This does not mean that there has to be a better than 50% chance that the appeal will succeed. It means only that the appeal represents a credible legal argument that should be heard at a full hearing because it has a chance of succeeding.

In these appeals, it is understandable that there is a real prospect of success in the legal sense. The Leasehold and Freehold Reform Act 2024 is a new law that affects a large number of freeholders and leaseholders. The question at the core of the appeal is whether the Leasehold and Freehold Reform Act 2024 strikes a proportionate balance between the interests of leaseholders and freeholders. This requires the Court of Appeal to come to its own view on proportionality.

Even if a single judge considering an application for permission to appeal is not persuaded that there is a real prospect of success, permission can still be granted on the basis that there is some other compelling reason to hear an appeal. There also appears to be a compelling reason to hear these appeals. The Leasehold and Freehold Reform Act 2024 potentially affects up to 5 million leasehold flats and houses and there is a substantial amount of money at stake for both freeholders and leaseholders. It is in the interests of both freeholders and leaseholders that these issues are resolved in the higher courts because that should bring certain answers to these questions without the need for further litigation.

Why are the freeholders being given another go?

An appeal is not a re-run of the first hearing. An appeal is a legal review that usually does not involve hearing any evidence. The freeholders are not being given another chance to present all of their arguments again. The appeals will only consider whether there is a legal argument that the first decision was wrong, not all the ins and outs of the freeholders’ case.

Why has the government let the appeal go ahead?

The government has no control over whether an appeal goes ahead. The freeholders have the right to seek permission to appeal. It is unsurprising they have done so given the amount of money they claim is at stake. Permission to appeal is considered by the Court of Appeal in accordance with the Civil Procedure Rules and associated case law. If the freeholders choose to make an application for permission to appeal there is nothing the government can do to stop it.

The only role the government had in the permission process was that it was allowed, as is any other Respondent, to put in a five page statement giving reasons why permission should not be granted.

Does the fact that the freeholders have permission to appeal mean they will win?

No. For three reasons.

First, permission to appeal is discretionary and is only the first stage of any appeal. There is generally no automatic right of appeal in civil cases. Permission to appeal does not involve a detailed consideration of the merits of the legal argument. As above, the legal test applied is whether there is a real prospect of success or some other compelling reason to hear the appeal.

Second, statistically most appeals fail. According to the statistics from HM Courts and Tribunals Service between 2003 and 2024 (the most recent year available) there were 22,082 appeals filed with the Court of Appeal Civil Division. 12,561 of those appeals were dismissed by the Court of Appeal following a hearing, dismissed by consent (which may mean the parties reached an agreement) or struck out by the Court of Appeal. Overall that means between 2003 and 2024 57% of appeals to the Court of Appeal were dismissed, most by the Court of Appeal giving judgment against them.

Human rights and public law appeals to the Court of Appeal are even less likely to succeed than the average appeal. HM Courts and Tribunals data show that between 2018 and 2024 (the period for which Court of Appeal data are available) there were 555 appeals involving judicial review or which were recorded as being public law or tribunal cases. Of those 555 appeals, 427 were dismissed following a hearing, dismissed by consent or struck out. Overall that is a failure rate of 77%, albeit that it is not possible to isolate statistics for judicial review appeals from other appeals from tribunals from 2021 onward.

Third, most of the factors that the Court of Appeal will be considering are against the freeholders. Challenges of this nature very rarely succeed in English courts.

The reason most appeals fail is because the English legal system favours certainty. Cases should generally be resolved at first instance. Parties should be entitled to rely on first instance judgments without the time and expense of dealing with an appeal. The appellate courts are also generally reluctant to interfere in decisions made by first instance judges because they do not hear the facts for themselves. It is often very hard to divorce points of law from factual findings. Factual findings will normally heavily influence the appellate court’s view of the legal points. In this case the Divisional Court has found that Parliament is entitled to make the three changes being challenged to address the inherent unfairness in the leasehold system and to move to a better system of property ownership. If the Court of Appeal reaches the same view then the freeholders will have difficulty in succeeding in their appeals.

The reason most judicial review appeals fail is that they are asking the courts to change decisions that have been made by Parliament or public bodies. It is not the function of the courts to second-guess the will of Parliament, which is elected. In this particular case the freeholders are arguing against measures that have long been the subject of cross-party political consensus. Both main political parties promised to enact these reforms in their manifestoes. The reforms have been extensively considered by the Law Commission and in consultation exercises. The question of proportionality has been considered exhaustively. Unless Parliament has done something very seriously wrong the domestic courts will usually defer to what Parliament has decided. To do otherwise runs the risk of making the country ungovernable, because anyone who takes issue with a decision made by Parliament could overturn it in the courts.

In these appeals the freeholders continue to ask the Court of Appeal to make a declaration of incompatibility. They say that the Leasehold and Freehold Reform Act 2024 infringes their right to private property because the changes made do not afford them adequate compensation for what they claim they are losing.

Declarations of incompatibility are very rarely granted. They are a tool designed to preserve the sovereignty of Parliament. The Human Rights Act 1998 gave direct effect to rights under the European Convention of Human Rights. The Act requires the courts to consider the convention and decisions of the European Court of Human Rights. The courts were not given the right to overturn legislation made by Parliament. In our system of government Parliament is sovereign and can make and unmake any law. A declaration of incompatibility is a means of maintaining the sovereignty of Parliament. The courts can draw an issue to Parliament’s attention with a declaration of incompatibility but cannot force a change in the law, that decision being left to Parliament.

Since the Human Rights Act 1998 came into force in September 2000 the approach of the courts has generally been to try and read our laws in a way that gives effect to the European Convention on Human Rights without making a declaration of incompatibility.

A further factor that will weigh against the freeholders in these appeals is that the first instance decision was made by two judges sitting as a Divisional Court. The judgment being appealed is very well reasoned. It deals comprehensively with all the points the freeholders raised.

Crucially, the Divisional Court found that what the government was trying to do with the Leasehold and Freehold Reform Act 2024 is to address the inherent unfairness in the leasehold system represented by the fact that the leaseholder effectively has to pay twice for the same property, once on buying it and again when the lease starts to run down. The Divisional Court found that dealing with this unfairness is a legitimate aim and that the measures adopted by the government were proportionate because while they did disadvantage the freeholders they did not excessively disadvantage them.

Lord Justice Holgate is an acknowledged public law specialist. Mr Justice (now Lord Justice) Foxton is a well-regarded commercial judge. The Court of Appeal will hear the arguments, but it is likely to be reluctant to find that the decision made last October should be overturned given the quality of the reasoning and the standing of the judges who made that decision.

Another difficulty for the freeholders is that A1P1 arguments very rarely succeed in the domestic courts. Many of the arguments the freeholders made last year had already been considered and dismissed in the Annington Homes case. In that case Annington argued that the government was infringing its A1P1 rights by extending leases of military homes subject to a 1996 sale and leaseback agreement with Annington. The High Court dismissed Annington’s challenge. Annington settled with the government before the Court of Appeal heard its appeal.

There are only two examples of A1P1 arguments succeeding in the domestic courts and both in the Supreme Court.

In the Scottish case of Salvesen v Riddell [2013] UKSC 22 the Supreme Court considered the Agricultural Holdings (Scotland) Act 2003. Scottish tenant farmers had security of tenure, meaning they could not be thrown off their land. Landlords deliberately let farms to limited partnerships in which the landlord and farmers were partners. The landlords had the power to dissolve these partnerships. Once the limited partnership was dissolved there was no tenant and this allowed the landlord to reclaim possession of the farm.

The Scottish government decided to change the law to allow tenant farmers to claim an indefinite tenancy of their farm even if a limited partnership was dissolved. All a tenant had to do was serve notice under the new law. The issue there was that the Scottish Parliament changed the relevant dates for serving notice after the bill was introduced to the Scottish Parliament.

This meant the law applied retrospectively to notices served in the six-month period before the revised law was proposed. This left landlords with no means of protecting themselves against the changes.

The Supreme Court found that the law was not compatible with the landlord’s A1P1 rights because it was an excessive and individual burden on them which was not proportionate to the harm the Scottish government was trying to address.

In 2014 the Scottish government amended the 2003 law to restore the previous position for landlords by invalidating any tenancies that had been granted. The landlords were not awarded any compensation.

Interestingly, when the tenants attempted to sue the Scottish government for compensation under A1P1 for the loss of their tenancies, the Scottish courts dismissed their claims saying that the tenants had suffered no direct losses as a result of the remedial order, which corrected the unlawful creation of the tenancies (McMaster v Scottish Ministers). The Scottish courts found that the termination of the tenancies was a control of use, not a deprivation of a possession. The Supreme Court declined to hear a further appeal from the tenant farmers.

In the Welsh Asbestos Case, the Welsh Parliament passed a law requiring employers that had worked with asbestos and caused their employees serious illness to compensate NHS Wales for the costs of treating those diseases.

The same law required insurers to pay out under employer insurance policies even if they had previously excluded liability for such risks.

The Welsh Parliament referred the case to the Supreme Court. The Supreme Court was asked whether the law was one the Welsh Parliament could make and whether, even if it could be made, it was compatible with the A1P1 rights of the employers’ insurers. The Supreme Court split 3 to 2.

The majority found that the Welsh Parliament was limited to making laws regarding the organisation of NHS Wales. A law imposing charges for industrial diseases was not sufficiently related to the organisation of the funding of NHS Wales to be permissible.

In any event, the law contravened A1P1 because it required insurers to pay for diseases that were not covered under the original policies and it retrospectively imposed liabilities on insurers that were not a proportionate means of raising money for NHS Wales.

The minority found that it was possible for the Welsh Parliament to make a law requiring employers (but not insurers) to be primarily liable for the charges, even if claims could then be made on insurance policies that did not have exclusion clauses. That would be compatible with A1P1. The part of the law that overrode exclusion clauses was not compatible with A1P1.

The Scottish and Welsh cases are very different to the Leasehold and Freehold Reform Act 2024.

The 2024 Act is not retrospective. It also does not take away all of the freeholders’ rights to compensation.

Specifically, the 2024 Act amends previous Acts of Parliament to limit the landlord’s rights to compensation that have always been subject to a statutory scheme. The right to marriage value is not found in any lease, nor is the right to claim legal costs on any lease extension or freehold purchase.

The right to ground rent is in the leases, but the loss of the rent is something for which the freeholder will still be compensated.

This very different to what was happening in Scotland and Wales, where there were interferences in long-standing contracts without an attempt to strike a fair balance between the parties.

What happens if the freeholders win?

If the freeholders win their appeals then the Court of Appeal should make a declaration of incompatibility. This does not require the government to do anything, but it may mean the freeholders can bring a claim for compensation if nothing is done to amend the law. There is no recorded example of compensation being paid even after a declaration of incompatibility has resulted in an amendment to the relevant law.

In practice, the government is likely to seek permission to appeal from the Supreme Court before it makes any attempt to amend the law.

The Human Rights Act came into force in September 2000. As of December 2025 the Ministry of Justice reports that there were 63 declarations of incompatibility. 13 of these were overturned on appeal. 4 were awaiting further appeals. 33 had been dealt with by amending the relevant law or by taking other measures. 13 were still awaiting action. There is no recorded case of compensation being paid after a declaration of incompatibility is made, whether or not the government has amended the relevant statute.

How long will an appeal take?

It is unknown if the appeals are being heard on an expedited basis. Typically an appeal hearing is between six and nine months after permission is granted.

Judgments are usually reserved following the appeal hearing and given in writing later. Judgments in cases like this would usually take anywhere between one and six months after the hearing.

We can therefore expect the appeal hearing to be in late 2026 or early 2027 and a judgment in the first half of 2027, but it may be sooner or later if the matter is expedited.

The appeal hearing will be in public before a panel of three judges. The hearing will be held at the Royal Courts of Justice on the Stand. Many Court of Appeal hearings are live-streamed via YouTube. If this hearing is live-streamed details will be given nearer the time.

Can the freeholders or government appeal again?

There is no automatic right to a further appeal for either side. If the freeholders lose it is likely that they will seek permission to appeal to the Supreme Court. The same applies if the government loses, it will most likely also seek permission to appeal to the Supreme Court. The Supreme Court is the final appellate court. It hears about 60 cases a year. The Supreme Court only hears cases that raise points of law of wide importance. The Supreme Court’s most recent annual report shows that only about one-third of applications for permission to appeal are granted each year. The success rate of appeals to the Supreme Court is broadly equivalent to the Court of Appeal in that most appeals are refused.

Won’t the appeal delay the implementation of the Leasehold and Freehold Reform Act 2024?

No. On 24 March 2026 and again on 29 April 2026 Matthew Pennycook, Minister of State for Housing and Planning, said that the government would get on and implement the 2024 reforms and work to introduce Commonhold. He said the reason for the delay is that there are errors in the drafting of the law not because of the judicial review. He also said that the drafting errors will be fixed as part of the promised Commonhold and Leasehold Reform Bill expected before Parliament later this year. The measures also require the government to set the rates to be used to determine the price payable for a lease extension or freehold purchase under the new rules. There is, however, a risk that once the rates are determined that the freeholders will bring a fresh judicial review against the rates that are eventually set.

The bottom line

Those who have said freeholders have “won” permission to appeal are exaggerating and wrong.

Permission to appeal does not mean the freeholders will go on to win the appeal. As many readers will remember, the freeholders required permission to argue their judicial review. They still lost. The freeholders are going to struggle in any appeal.

Whilst the delay of an appeal is unwelcome and creates further uncertainty, the government has committed to introducing the 2024 Act and continuing with its Commonhold and Leasehold Reform Bill so that all the new laws are in place by the end of Parliament. The government has also promised that it will consult on the new rates to be used to determine the prices payable under the 2024 Act well before it comes into legal effect.

Leaseholders are tired of all this uncertainty and litigation.

None of this is any comfort to people who are having issues with ground rents or extending their leases.

Liam Spender is an LKP trustee and a City solicitor