By Liam Spender
Liam Spender is a trustee of LKP and head of real estate litigation at Velitor Law. The views expressed here are his own.
The freeholders’ judicial review began at the High Court in London today, running until Friday.
Freeholders are off to a bad start with their argument that the Leasehold and Freehold Reform Act 2024 infringes their human rights.
Both judges are expressing scepticism. Particularly over whether marriage value, a key issue in the case, is a possession of the freeholders at all.
The case is being heard by Lord Justice Holgate and Mr Justice Foxton in Court 76 at the Royal Courts of Justice on Strand, London.
In a packed and stuffy court room sat 22 barristers, including 10 KCs, and around two dozen solicitors. Court Room 70 was an overflow court room. More than 70 people have also been granted links to watch remotely.
There are six groups of freeholders facing off against the government. The six groups of freeholders have interests in around 400,000 leasehold flats and houses. They include the Duke of Westminster’s Grosvenor Estates, the Earl of Cadogan’s Estate, Albanwise Wallace, Long Harbour, ARC Time Freehold Income Fund, Ground Rents Income Fund plc, American fund manager PGIM and two charities, the John Lyon’s Charity and the Portal Trust.
The hearing began at 10.30 running until 4.30.
The judges will hear from the freeholders until 11.30 on Thursday morning. The government will then present its defence until after lunch on Friday. The freeholders will then respond.
The freeholders’ cases will be presented collectively and organised by theme. Different freeholder lawyers will be speaking on different themes during the two or so days allocated.
At the outset, Lord Justice Holgate emphasised that the case was not about prime central London properties, or London or the South East, and that he was interested in its effect across England and Wales.
Much of the freeholders’ evidence focuses on the alleged transfer of wealth to leaseholders in London. Indeed, all of the John Lyon’s Charity’s argument revolves around its estate in St John’s Wood. This does not bode well for the freeholders, although it may change as the hearing progresses.
Lord Justice Holgate then continued by giving judgment on a number of applications to admit further evidence.
Most of was permitted. Permission for Cadogan / Grosvenor to rely on a second witness statement from prominent freeholder solicitor Damian Greenish was refused because it strayed into legal argument and expert evidence. Albanwise Wallace was also refused permission to rely on a new expert report because it was too late.
Lord Justice Holgate also raised a legal point about the challenge being mounted “ab ante”, before the Act has been brought into force, and whether that required the freeholders to meet a stricter legal standard. That standard is showing that the Act likely infringes their rights in virtually all cases.
Three different KCs spoke for the freeholders today.
Victoria Wakefield KC, instructed by Albanwise Wallace, spoke on the argument that the Leasehold and Freehold Reform Act is badly focused. Ms Wakefield’s point was that the measures would benefit buy-to-let investors rather than residential occupiers and that was not the stated aim of the Act.
Ms Wakefield’s argument was given short shrift by both judges. They questioned whether the measures were ever intended to be limited to leaseholders occupying flats as their homes, noting that the current right to extend a lease was not subject to any residency requirement. The judges also seemed not to accept that buy-to-let investors were in a different category to owner-occupiers given they also had obligations to pay service charges and were consumers of services arranged by freeholders, such as buildings insurance.
Following Victoria Wakefield, Monica Carrs-Frisk KC for the ARC Time Freehold Income Fund, GRIF and PGIM, spoke on the European Court of Human Rights case law. She emphasised that the freeholders expected hundreds of millions in losses as a result of the reforms, which would also affect pension fund liabilities.
Ms Carrs-Frisk’s key point was that in the human rights case law there was a presumption that where property was being expropriated in this way then near to full market value should be paid as compensation. She claimed that was not achieved by the current wording of the Act, which both removed freeholders’ legitimate expectation of receiving marriage value and caps the amount of the contractually payable ground rents to be used in the calculation of the price payable for lease extensions in the future.
Ms Carrs-Frisk also said that no-one seriously suggested that ground rents above 0.1% of the freehold value were injurious to leaseholders. She cited a number of examples of mortgage lenders willing to accept higher ground rents.
Lord Justice Holgate doubted that there was any expropriation of freeholder property in this case. He doubted whether marriage value was a property right at all. The judge noted that this was a right given to the freeholders by statute in 1993. All that was happening was that the statute was being changed in relation to future transactions. The judge also doubted that the Lindheim and Karibu cases cited by Ms Carrs-Frisk were of any legal value given they did not deal with leases granted at a premium.
Ms Carrs-Frisk also emphasised that most of her clients claimed to have large proportion of buy-to-let investors, some above 50%. Lord Justice Holgate observed that if the average across all flats were only about a third buy-to-let then most freeholders had significantly less than that.
As with Victoria Wakefield, Ms Carrs-Frisk was peppered with unsympathetic questions and interventions from both judges.
Tellingly, Ms Carrs-Frisk had no answer to give when the judges asked how much pension fund money was at stake as a result of the reforms, a common refrain of lobbyists like the Residential Freehold Association. Ms Carrs-Frisk later confirmed that the freeholders have no evidence available to justify that assertion.
The day concluded with Stephen Jourdan KC speaking for Long Harbour. Mr. Jourdan spoke briefly and will continue for an hour tomorrow morning. Mr. Jourdan began explaining how marriage value arises as a result of a freehold and lease being worth more when combined in the hands of either landlord or tenant. The tenant currently has to pay half of that when extending a lease.
Mr Justice Foxton had a number of technical questions on whether a lease for 990 years is worth more than one for 90 years and by how much.
Lord Justice Holgate seemed not to be impressed by Mr. Jourdan’s attempt to explain marriage value by reference to the tired freeholder example of two Chinese vases being worth more together than apart.
lord Justice Holgate criticised the example as being inapt because a lease is a wasting asset and the tenant is in a weaker bargaining position when trying to extend because of marriage value arising after a lease falls below 80 years. So nothing like valuing two non-depreciating Chinese vases, or different fields coming under the ownership of the same farmer, which was also referenced by Mr Jourdan.
Before rising Lord Justice Holgate asked the freeholders’ counsel to shorten their arguments on the valuation point from the two hours planned for tomorrow. Lord Justice Holgate expressed dissatisfaction that two counsel were speaking on the same topic, with James Maurici KC due to speak tomorrow.
After some back and forth with Mr. Maurici, appearing for Cadogan / Grosvenor, Lord Justice Holgate agreed the court would sit from 10.00 tomorrow on condition that there was less than 2 hours from Mr. Maurici on the valuation issue.
Overall the first day has gone badly for freeholders. Their barristers seem to be having trouble getting the judges to accept fundamental building blocks of the freeholders’ case. Much of their legal argument has been heard in silence, or met with unsympathetic interventions, which is usually a bad sign, as is the request from the judges to shorten the freeholders’ legal arguments. This could change over the remaining three days of the hearing.
The case continues. Court sits earlier at 10.00 tomorrow morning.
Related posts:
Judicial Review Day 2: Heat is on and the wigs come off in sweltering courtroom 76
Leaseholders blocked from intervening against freeholders’ judicial review against reforms
Your full guide to this week’s judicial review by freeholders to torpedo reform to leasehold
Freeholders on course for judicial review showdown against leasehold reforms in January
Freeholders win right for a judicial review to challenge 2024 Act
Your full guide to this week’s judicial review by freeholders to torpedo reform to leasehold
Mr Spender,
I appreciate the daily update It was informative and detailed.
If marriage value became law 1993 and my lease started 28/August 1990 would I have to pay marriage valve as now only 64 years left on lease. Thank you
Based on the key dates in your lease and UK leasehold law, **Yes, you would almost certainly have to pay marriage value when extending your lease now that only 64 years remain.**
Here’s why, broken down:
1. **The Law:** Marriage value was introduced by the **Leasehold Reform, Housing and Urban Development Act 1993**, which came into force on **1 November 1993**.
2. **Your Lease Start Date:** Your lease began on **28 August 1990** – *before* the 1993 Act came into force. This means your lease qualifies as an “**old lease**” under the Act.
3. **The 80-Year Threshold:** The critical rule for old leases is:
* **If you extend when the lease has 80 years or MORE remaining:** You **do NOT pay marriage value.**
* **If you extend when the lease has LESS than 80 years remaining:** You **DO pay marriage value.**
4. **Your Current Lease Length:** You state only **64 years remain**. This is **significantly below the 80-year threshold.**
**Conclusion:**
Because you are extending an “old lease” (started before 1 Nov 1993) and the lease term has now fallen **below 80 years (to 64 years)**, marriage value **will be payable** as part of your lease extension premium under the 1993 Act.
yes you would unfortunately. The law affects all leaseholds under 80 years.
It appears that the John Lyon’s Charity is upset at the recent backlash from leaseholders and are asking for respect. I would suggest that respect should be given to the charities that have chosen not to oppose leasehold reform, recognising the hardship and injustice it causes for thousands of homeowners. While John Lyon’s Charity is in court attempting to block the government’s reforms many are dismayed that a charitable organisation is prioritising revenue over the well-being of ordinary leaseholders. In contrast, other charities, some of which also own residential freeholds, have stayed silent or even expressed support for reform, acknowledging the unfairness and emotional toll of the current leasehold system. These organisations deserve respect for putting people above profit and upholding the values at the heart of charitable work. Where is their respect for the democratic process and government?
Well said.
Thank you for this update, very grateful. I am a leaseholder affected by this. Nowhere else in the world buying flats has this feudal law. I am grateful government have taken this to their hands to try to make this a fair policy to all. Marriage value is outrageous, and when I bough my flat in 2014 no solicitor informed me of that, I only learnt it recently. If I knew I would never have bought a leasehold.
I agree the same happened to me when I bought a flat in 1987 with a mortgage ,the lease on the flat then was 69 years ,my solicitors failed to advise me of this and the consequences I am now in the position of owning a flat with a very short lease with no hope of being able to afford to extend the lease ,I must add I was a young man with limited knowledge of property leaseholds at the time and given the right advice I would never have bought the flat ..
Thank you for your comprehensive overview the first day hearing.
I am a leaseholder with under 80 years left on my lease so affected by marriage value. 5 years ago, I was quoted 37k to extend the lease (which I didn’t have) and now the freeholder is quoting 115k to extend my lease. I cannot afford this and I am trapped in my home as a single working mother.
Putting people before personal profit, This is the definition of justice! Good on the judges!