Losing their £5m judicial review against the leasehold reforms threatens freeholders’ long era of primacy. So, what’s next?

Parasitical, wealth-eroding freehold landlordism has suffered a devastating blow, but the appeals may keep coming if landlords reckon delay works in their favour

The full Judicial Review ruling is here:

https://caselaw.nationalarchives.gov.uk/ewhc/admin/2025/2751

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By Liam Spender

Liam Spender is a trustee of LKP and head of real estate litigation at Velitor Law, whose class action leasehold insurance commissions is reported on BBC here The views expressed are his own.

Friday brought a 167-page judgment from the High Court. Over 558 paragraphs, two judges comprehensively dismissed the claims of freehold investors’ that the Leasehold and Freehold Reform Act 2024 (“LAFRA”) violates their human rights.

Specifically the freeholders challenge three measures within LAFRA.

First, the removal of their right to a 50% share of marriage value when a lease with 80 years or less is extended.

Second, the cap on the ground rent that can be taken into account in calculating the price payable for an extended lease.

Third, the elimination of the freeholders’ right to charge leaseholders the legal and professional fees for extending leases.

The freeholders making the challenge were the relatively acceptable face of ground rent grazing, although the term is relative as all are involved in a racket.

The Grosvenor and Cadogan Estates formed one group of claimants. The ARC Time Freehold Income Fund, the Ground Rents Income Fund and PGIM formed another. There were separate claims from Long Harbour, Albanwise Wallace, John Lyon’s Charity and the Portal Trust.

Other large freeholders, such as Vincent Tchenguiz’s Consensus Business Group and James Tuttiett’s E&J Estates, were conspicuous by their absence.

The freeholders claim the changes in LAFRA violate their right to enjoyment of their private property under Article 1, Protocol 1 (“A1P1”) of the European Convention on Human Rights. They argue the measures expropriated their property without proper justification or fair compensation.

The freeholders lost. Badly. But they have nevertheless succeeded in delaying the implementation of the Act for more than 18 months. And counting, which will be the real purpose of their claim to them.

The High Court comprehensively dismisses the freeholders’ challenge. It finds that Parliament is entitled to address fundamental defects in the system of property ownership by reforming the system in favour of leaseholders, even at freeholders’ expense.

The judgment is sharply critical of the idea that freeholders thought they could live in a world where the mechanism for calculating the price payable on a statutory leasehold extension would never change, as they argued.

The High Court finds that they took the risk that it would change and they have no right to complain about it now.

The freeholders lost so badly for three reasons

First, is that what they were seeking – a declaration of incompatibility – is difficult to achieve. The most recent statistics show that in the 25 years of the Human Rights Act’s history, there have been only about 50 declarations. About 20% were overturned on appeal. The rest were addressed by changing the law. In some cases the law had already changed and the declaration related to previous law.

Second, a challenge based on A1P1 is even less likely to succeed than a claim for a declaration of incompatibility.

There are just two examples in 25 years of the Supreme Court upholding an A1P1 argument. Both concerned devolved jurisdictions in Wales and Scotland where something had obviously gone badly wrong with the legislative process.

Large sections of the High Court’s careful judgment are dedicated to explaining the years of thinking that went into LAFRA by the Law Commission and others, leading to the conclusion that there was no similar error in Parliament’s decision making.

Third, even leaving aside the formidably difficult legal terrain, and despite their case being argued by some of the most expensive lawyers in London, the freeholders’ argument was just not good enough to prevail.

The freeholders’ case depended essentially on showing that Parliament adopted LAFRA without making a rational decision to prefer leaseholders over freeholders, and in a way that penalised freeholders financially with no wider public justification.

If that sounds hard to do, then it is so. The foremost difficulty the freeholders face is that it is not the role of the judiciary to re-make decisions that are the political judgment of Parliament.

Parliament’s job is to listen to the electorate and decide where to draw the line on issues of social importance. It is not the role of the courts to interfere in that decision unless there is something very seriously wrong with how or where the line has been drawn. The freeholders fail to make that case.

Of particular significance in the judgment is the way the High Court has dealt with the freeholders’ argument that Parliament was wrong to pass LAFRA because it deprives them of market value for their assets, which they say must include marriage value and uncapped ground rent.

The High Court finds that there is no single definition of market value.

The High Court also finds that market value is not the required measure of compensation.

It is unpersuaded by the highly technical approach adopted by the freeholders trying to justify the current system of lease extension and enfranchisement as being derived from wider valuation practice, including the tired old examples of the increase in value caused by joining neighbouring fields and reuniting a pair of Chinese vases.

The High Court finds that wider valuation practice is inapt to describe what happens when a lease is extended.

When Parliament establishes a statutory scheme of compensation, as here, then it is entitled to prescribe assumptions as to how value will be determined.

The assumptions in the statute can be changed to affect the value to be paid without infringing A1P1, which is all that is actually happening here.

Another major failure in the freeholders’ case is their argument that the human rights jurisprudence has moved on since the Duke of Westminster challenged the Leasehold Reform Act 1967 (and also lost, in a case called James).

The High Court finds that the much-vaunted cases of Lindheim and Karibou Foundation concerned property rights that were very different to English residential leaseholds. In Lindheim and Karibou Foundation the argument was purely about ground rent because the relevant plots were sold without an upfront premium being paid. The High Court finds that this is not the same as English leaseholders, who effectively have to pay to buy their property interest again even after paying a large upfront premium and a ground rent.

The High Court also considered that Lindheim and Karibou did not say anything different to James, which is that Parliament is entitled to adjust the law to favour leaseholders over freeholders provided it does so to address a problem of social policy.

Looking back over LKP’s contemporaneous reports, it seems all the warning signs were there in the comments the judges were making during oral argument.

https://www.leaseholdknowledge.com/tag/judicial-review

It is also gratifying that many of the arguments LKP intended to put forward when it applied to intervene on the government’s side are reflected in the way the court has approached the legislative history and purpose of LAFRA.

Leaseholders blocked from intervening against freeholders’ judicial review against reforms

The expense of this case must have been mountainous for the freeholders.

Collectively, and to date, the freeholders may not have got change from £5 million for their own costs. Their legal teams were actively threatening the government over this litigation even before LAFRA was passed. Probably about half the expense came from the hearing alone.

Even at the low rates charged by the government legal team, they will now also be looking at having to pay a figure in the low six figures towards the government’s costs. Ideally, paying them off first would a condition on any permission to appeal.

The loss has evidently come as a blow to the freeholders. Years of confident predictions, and of smiling threats, of the courts siding with them and the taxpayer having to fork out billions in compensation … are dismissed with often lacerating criticism in the judgment.

The voices of the freeholder class and their enablers, the surveyors, the lawyers, the managing agents, the harder of thinking in the House of Lords have all fallen silent.

It seems not a one of the freeholders has put out even the usual milquetoast statement of strongly disagreeing and considering options for appeal.

Perhaps their pomp is brought down to the grave. But freeholders have a preternatural ability to cling on.

What comes next?

Inevitably, the freeholders will try to appeal. They will need permission to bring an appeal. They have to seek permission from the High Court first.

The test is whether the appeal has a real prospect of success or whether there is some other compelling reason to hear an appeal.

The judgment is very carefully reasoned and well-written. The issues have been considered by a Divisional Court, in this case consisting of one Court of Appeal judge (and former President of the Lands Chamber) and one soon-to-be Court of Appeal judge.

The legal prospects of appealing it seem low. That weighs against permission to appeal.

Given the scale and importance of the issue, it would be surprising if the freeholders did not whine that they should get permission on the basis of there being some other compelling reason to hear an appeal.

Their argument would be that there are many billions at stake and there are many hundreds of thousands of leasehold properties affected and that does require certainty in the law. Whether that certainty requires an appeal or can best be delivered by leaving the decision as it stands is the question.

If the Divisional Court refuses permission, the freeholders can seek permission directly from the Court of Appeal. It may have a different view, even if the Divisional Court refuses. It may think the same.

If the freeholders can get permission to appeal, another question is whether the appeal goes to the Court of Appeal or whether it goes straight up to the Supreme Court as a leapfrog appeal.

A leapfrog appeal is rare, but it is a possibility if the Divisional Court is persuaded of the public interest. The freeholders’ colossal sense of entitlement probably dictates that they try this approach.

The relevant test for a leapfrog appeal is whether there is a wide public interest in the decision going straight to the Supreme Court to save time, or whether the Court of Appeal would be bound by precedent to make the same decision and the legal issues in the relevant precedent have already been considered fully by the Court of Appeal and in the proceedings.

This case may fit the public interest ground for going to the Supreme Court and a leapfrog would knock off at least 18 months from the process.

The freeholders may also try to make arguments that the Court of Appeal would be bound by precedent to make the same decision, which they would say then merits an immediate review by the Supreme Court.

We will find out soon enough.

An application for permission to appeal from the High Court to the Court of Appeal must usually be made within 21 days of the judgment. An application for a leapfrog appeal direct to the Supreme Court must be made within 14 days of the date of judgment.

Even if the Divisional Court permits a leapfrog appeal it is still up to the Supreme Court to decide whether to take the appeal. The Supreme Court sometimes does refuse the leapfrog and require the case to go via the Court of Appeal.

Usually but not always the decision on permission to appeal is made on paper without a hearing. There may be a further hearing if there is an argument over how to document the court’s judgment in an order, or whether there is to be a leapfrog appeal, or perhaps over costs.

What are the freeholders prospects on appeal?

The prospects of the freeholders winning any appeal are poor. The freeholders would still face all the same legal and constitutional issues in trying to overturn the will of Parliament in a domestic court. An appeal would come with the added difficulty of already having their arguments comprehensively examined and dismissed.

A further added difficulty is that on appeal they have to show that the High Court has made a flawed assessment of Parliament’s decision and that Parliament’s decision is also wrong in law.

That is going to be very difficult to do given the comprehensive reasoning of the judgment.

Still a further difficulty is that it would be open to an appellate court to disagree with the High Court’s reasons, but still find other reasons that Parliament had made an A1P1 compliant choice.

How long will an appeal take if it happens?

If it happens and without expediting the process, typically an appeal to the Court of Appeal will take 12 – 18 months from permission to hearing. That may be reduced to a few months if the appeal is expedited.

A judgment from the Court of Appeal can take up to three months but there is no fixed timetable so it can be more or less.

An appeal to the Supreme Court is usually heard about a year after the application. Judgment typically takes a few months. Again there is also no fixed timetable for judgment so it may be more or less.

If the case passes through both the Court of Appeal and the Supreme Court without expedition then we are looking at another two to three years.

With a leapfrog and no expedition that may be reduced to about a year.

With a leapfrog and expedition it could come down to a period of months.

For example, the recent car finance commissions case went from the Court of Appeal to judgment of the Supreme Court in about 10 months.

And if the freeholders appeal to Strasbourg?

If the freeholders lose in the Supreme Court then they can apply to take their case to the European Court of Human Rights in Strasbourg. In a 2023 FAQ the Court said that even the most important cases there are rarely decided in less than three years.

If the government loses in the Supreme Court then it cannot appeal further. It would most likely look to amend LAFRA to make it compatible with the European Covention on Human Rights. That is likely to take some time because it would require extensive consultation and a new Act of Parliament.

And can the government get on with things even while litigation is in progress?

Yes, it can. Lindheim is an example of a government getting on with implementing the law it had passed even though it was later overturned.

The same choice is open to the British government given the clear reasoning in favour of LAFRA in the judgment.

The risks must be lower here considering Lindheim has been dismissed as a relevant precedent.

In any event there are areas of LAFRA that have never been subject to challenge, examples include regulations on insurance commissions, strengthening service charge protections and removing the landlord’s right to legal costs in disputes.

All those provisions could (and should) be implemented regardless of any ongoing litigation.

So why did the freeholders bother with judicial review?

Even if the expensive legal teams only whispered it to their clients, the freeholders must have been told the odds were against them.

First is because they have no choice. LAFRA is a death knell for their rotten business. They know this will be among their last stands. It is also in their nature. Their mindset is that leaseholders never matter except as a ready source of cash. The freeholders bully people to get their way and are prepared to spend any amount, usually of other people’s money, in so doing.

Second is because, whether their lawyers told them or not, it is doubtful they ever expected to win in the domestic courts.

They must have proceeded with two hopes. Either that they can drag their case to Strasbourg and delay LAFRA by years. Or that they can string it out long enough that a more favourable government comes along, or something else turns up. Perhaps both.

Third is that perhaps they think litigation gives them leverage against the government. The freeholders have lost the argument in Parliament. The Commons was deathly silent on any argument in the freeholders’ favour as LAFRA went through. In the Lords the freeholders had only the feeblest of voices. And even then from those with vested interests or from more credulous quarters.

The freeholders may think a protracted legal fight is perhaps something the government would not want.

The problem the freeholders have is that they have picked a fight the government has to fight and win, and it has the resources to do so. The government cannot allow private interests to bring challenges to Acts of Parliament successfully otherwise the country becomes impossible to govern. Nor can the government allow a legal precedent to be set that it cannot make any law affecting private financial interests, for the same reason.

But we cannot discount the third possibility altogether.

The current Chancellor has shown she is willing to intervene on the side of big business if the courts look to be causing issues. Notably earlier this year Reeves said she was considering passing a law to reverse the effect of any Supreme Court judgment if it found too much in favour of motorists ripped off over car finance. Ostensibly to protect the UK’s reputation for international investment and the future availability of motor finance. In the end the Supreme Court adopted a narrower approach and the law was unnecessary. But the fact it was even mentioned is concerning.

The business department under the last government responded to freeholder lobbying by trying to derail LAFRA. The same department is currently consulting on whether to reign in the UK’s only opt-out collective action mechanism on the grounds that it is burdensome to companies to have to face challenges from large groups of individuals for their wrong doing.

A campaign cleverly orchestrated by big business through a group called Fair Civil Justice, which also had plenty to say about motor finance.

It is not hard to imagine the freeholders running a similar campaign to the motor money lenders and making headway with the Treasury.

It goes something like this: we invest in the UK on the basis of legal certainty and you are scaring off investment in much needed housing by penalising us with LAFRA. And won’t someone please think about the pensioners? And once the freeholders have the Treasury on side the views of the housing ministry will count for nothing in the internal machinations of government.

We can perhaps discount that version. The value of ground rent grazing is merely a rounding error among wider pension fund investments. And even less in broader UK investments. If the pension industry cared about LAFRA it would have already intervened with the Treasury, and probably stopped it.

A lighter version may be that the freeholders use the threat of any appeal as leverage to wring concessions from the government. The strategy of using an appeal as a ransom piece has already worked once:

Annington Homes was originally a party to this judicial review. Annington held the freeholds to the Ministry of Defence Married Quarters Estate, a disastrous 1990’s PFI. Annington and the Ministry of Defence fell into dispute over the rent payable.

The government decided to start enfranchising the properties from under Annington. This led to a separate judicial review, which Annington lost and obtained permission to appeal. At the end of 2024 Annington abandoned its appeal and dropped out of this judicial review. In exchange the government bought back the Married Quarters Estate for £6 billion. So we should not discount the possibility of a deal.

That version goes something like this: the freeholders say to the government that if you set the rates used to calculate the price for a lease extension under LAFRA at levels more favourable to us than the current system then we will drop our appeal.

Other permutations, albeit ones requiring another Act of Parliament, are exemptions for charities, or grandfathering of leases with less than 80 years to run at the date the LAFRA was introduced to Parliament.

It would be a betrayal of leaseholders if any of that happened. Fiddling with LAFRA to placate freeholders undoes the promise of LAFRA to make lease extensions cheaper. The government now has well-reasoned cover from the High Court to make that a reality.

On the other hand the government can also move to further tip the table in its favour.

The High Court finds that LAFRA strikes an inherently fair balance even though it involves a huge transfer of wealth from freeholders to leaseholders. So there is nothing holding the government back from implementing the new system of fixed rates to reduce the price of lease extensions even before an appeal is heard.

The government could do so at rates better for leaseholders than under the current system. There is no good reason why the rates used to calculate the price payable are calculated in a way which currently produces rates barely above or actually below the yields on government debt. Ground rent grazing is not that safe a business, as this judgment shows.

On one view, implementing LAFRA may make it harder for the freeholders to win any appeal. If the government has implemented LAFRA in the meantime then it makes it harder for an appellate court to interfere because it involves taking rights off individuals that are already in place.

The downside is that once a scheme is implemented it may bolster the freeholders’ case because, unlike in the High Court, they will have actual numbers on which to base their arguments, as opposed to expert-led hypotheticals.

The bottom line

The freeholders’ business is rotten. It is exploitative. It brings misery to many leaseholders who find themselves paying all the bills with no control. And paying twice for the same flat when they come to extend their leases.

The laissez faire attitude of professional freeholders has also spawned ugly offspring in the form of poor quality and out of control managing agents, who inflict more misery in their turn.

Many of the freeholders’ shibboleths have been given short shrift in the High Court.

They have no divine right to marriage value.

Ground rent is money for nothing.

There is an inherent imbalance in the rights and interests of freeholders and leaseholders. Freeholders do not provide value by being noble long-term custodians.

It is now more than a hundred years since Lloyd George spoke at Limehouse and condemned the business of leasehold as nothing more than blackmail.

It is time the power and might of the state is put to the service of leaseholders by bringing LAFRA to life.

And once LAFRA is enacted we must move ahead with all the other reforms promised to make sure leaseholders are truly masters in and of their own homes.

The full ruling is here:

https://caselaw.nationalarchives.gov.uk/ewhc/admin/2025/2751