Liam Spender, LKP trustee and solicitor at Velitor Law, offers his personal guide to the judicial review starting this week against the Leasehold and Freehold Reform Act 2024 by assorted freehold owning groups. This is not legal advice
How it will be fought
Why LKP was excluded from intervening
What happens if the government loses, and what happens if it wins
How quickly can this fight to reform leasehold be resolved?
Why the freeholders are gaming for ever more delays
And who actually owns these outfits anyway
Attached legal documents, to illustrate all stages of this process, including the unsuccessful interventions by LKP and the Free Leaseholders group
This week sees a four day hearing in the Divisional Court. The hearing will be before Lord Justice Holgate and Mr Justice Chamberlain. The hearing will determine seven ground rent investor groups’ claims that parts of the 2024 Leasehold and Freehold Reform Act (“LAFRA”) breach their human rights.
This article summarises the parties, the legal arguments and looks at what may come next in the form of questions and answers.
Who is participating in the judicial review?
There are nine freeholders organised into six groups.
The six groups are:
(1) The ARC Group
Consisting of the ARC Time Freehold Income Authorised Fund (“ARC Time”), the Ground Rents Income Fund plc (“GRIF”) and PGIM, Inc (formerly known as Prudential Investment Management, no relation to Prudential plc, “PGIM”).
(2) The Cadogan and Grosvenor Group
Consisting of the Duke of Westminster’s Grosvenor Estate and the Earl of Cadogan’s Cadogan Estates.
(3) Long Harbour
(4) Albanwise Wallace
(5) John Lyon’s Charity
(6) The Portal Trust (formerly the Sir John Cass Foundation)
Until December 2024 Annington Properties (“Annington”) was also a participant. Annington settled its judicial review claim as part of the Ministry of Defence’s agreement to buy back the Married Quarters Estate.
The six groups between them claim to own the freehold interest in more than 390,000 leasehold flats and houses across England and Wales.
There are more than 4.5 million leasehold properties in England and Wales, so these parties represent less than 10% of the whole.
Conspicuous by its absence is Vincent Tchenguiz’s Consensus Business Group, which publicly claims to own the freehold to around 297,000 leasehold flats and houses.
When will the hearing start and how long will it last?
The hearing will begin at 10.30 on Tuesday morning and run until 4.15 on Friday afternoon. The judgment is likely to be reserved at the end of the hearing and will follow in writing later. Although it is possible that the judges may give their judgment at the end of the hearing with written reasons to follow later.
The court room is likely to be packed. The freeholders will field dozens of barristers and solicitors. They will face a legal team led by Sir James Eadie KC, acting on behalf of Angela Rayner, the Deputy Prime Minister and Secretary of State for Housing, Communities and Local Government.
Will any leaseholders be represented?
No, not directly. The government will speak for all 4.5 million leaseholders as a whole.
Both the Leasehold Knowledge Partnership and Free Leaseholders asked for permission to intervene but were refused at a hearing on 23 May 2025.
The only party given permission to intervene is the Speaker of the House of Commons. That is because a number of the freeholders are challenging the content and quality of the debate in Parliament over LAFRA. Under the Bill of Rights 1689 the proceedings of Parliament are not to be questioned in any court.
It is unclear why the freeholders have chosen to take a complicated constitutional point when they only have limited time to make their already complicated case.
It appears they are hoping that by making the case as complicated as possible as a matter of constitutional law they can distract from the key difficulty with their case, which is that it is a claim brought by a group of some of the richest property owners in Britain aiming to overturn a law designed to help ordinary residential leaseholders and brought in by a government with a manifesto commitment to enact that law.
What was in LKP’s intervention application?
We are publishing LKP’s evidence and legal argument.
For comparison we are also publishing Free Leaseholders’ evidence and legal argument so people can see both applications for themselves.
There were two applications to intervene and both were refused.
LKP’s application was made first, filed on 7 April 2025 and published for the first time today.
Free Leaseholders’ application was not filed until 14 May 2025, which we are also publishing today.
We are also publishing the freeholders’ joint position statements and those of LKP and Free Leaseholders for and against the application relied upon at the hearing on 23 May 2025.
Despite our asking for a copy of the judgment and the transcript of the hearing none of the other parties has provided a copy of either.
I thought Free Leaseholders’ application was rejected because it involved Michael Gove?
No. Free Leaseholders has claimed that there was panic in the court room when their barrister mentioned that Michael Gove would give a witness statement in support of their intervention. Free Leaseholders also claims that the judge said “I can feel the Claimant’s counsel twitching already”.
Neither statement is accurate.
What actually happened on 23 May was Free Leaseholders’ own barrister admitted that it was impractical for there to be an extra day of hearings just for interventions. The judge also asked who Michael Gove was. When he understood, he then commented that Speaker’s Counsel (not the Claimants’ counsel) was twitching at the mention of Michael Gove giving evidence (and the reasons for that are explained above).
There were also no signs of panic or audible gasps at any point in the hearing. The freeholders’ barristers and solicitors sat smirking silently throughout the hearing.
Why did the freeholders object to these interventions?
The freeholders objected on the basis that the intervention applications were made too late, raised evidence that they did not have the opportunity to answer and duplicated the government’s arguments. The freeholders also objected to the interveners having any protection from costs if the interventions did not persuade the court.
That included the John Lyon’s charity. Whilst it was supposedly neutral on the application it came up with a long list of alleged issues. It also said it had to reserve the right to potentially bankrupt the LKP with costs because of its own fiduciary duties as a charity.
All of the freeholders also attacked me personally for trying to act as LKP’s solicitor when I am in dispute with my own landlord, one of the ARC Claimants, over service charges. As you can see from the attached, the implication of their attack was that I was acting in breach of my professional duties as a solicitor.
It is notable that at the hearing on 23 May 2025 the judge criticised the quality of the freeholders’ witness evidence. That evidence trots out at length many of the usual freeholder shibboleths, such as their saintly professional management of buildings and their need to receive large legal costs for extensions of leases lest they lose interest in the process.
Why did the freeholders attack Liam Spender personally?
Anyone would think I had touched a nerve among these multi-billion pound ground rent investors. They are spending millions on lawyers to defend them yet went out of their way to take a personal pot shot at me.
Of course, Monica Carrs-Frisk KC, who appeared at the hearing on 23 May 2025 for ARC Time, did not bring this up in front of the judge. She did not mention it because she knows the point has no merit. It is absurd to suggest that a solicitor suing a defendant in his personal capacity cannot act for a client suing the same defendant in a different matter.
It is surprising ARC Time would raise any issue regarding any solicitor’s integrity. One of its freehold owning companies, Freehold Managers (Nominees) Limited, continues to use Liverpool firm JB Leitch despite suing it for more than £2 million in damages for professional negligence.
You read that right. ARC Time contains a freeholder continuing to use a solicitor it considers negligent to the point of suing it for more than £2 million in damages.
Any self-respecting firm of solicitors would usually stop acting on all matters if it were sued by a client. Most solicitors would consider that they could not fulfil their professional obligations to act in the best interests of a client suing it for damages.
Most clients stop using solicitors they sue for negligence, particularly when they believe they have suffered more than £2 million in damage at the hands of that solicitor.
Nominees retained JB Leitch to act on at least five cases before the First-tier Tribunal, including one involving forfeiture, when its professional negligence claim was in progress.
It is also a mystery why JB Leitch’s insurer did not insist on all connected work being stopped, it having to pay at least tens of thousands (and most likely more) for the defence of the claim.
We are publishing the court papers regarding Nominee’s claim. The claim concerned JB Leitch’s failure to advise Nominees that it had a claim for negligence against its previous solicitors, Ward Hadaway. Nominees alleged that JB Leitch negligently failed to spot that Ward Hadaway had not advised that the head leases at the Celestia development in Cardiff would not allow Nominees to recover costs related to the upkeep of the quayside. The claim was later expanded to cover fire safety costs that could also not be recovered from Celestia’s leaseholders. Nominees sought more than £2 million in damages. Mr. Leitch himself features for his personal allegedly negligent advice.
It appears that the claim was settled on confidential terms earlier this year. JB Leitch’s professional indemnity insurer, Travelers Group, paid to defend the claim and presumably paid for any settlement (if any).
It is surprising that even John Lyon’s Charity joined in the attack on me. Its lawyers agreed to the joint position statement containing the attack on me.
What is a judicial review?
A judicial review is a challenge to the legality of law passed by Parliament or a decision made by a public body.
The overwhelming majority of judicial reviews fail at the permission stage. Of those that pass the permission stage only about half go on to succeed.
Which aspects of LAFRA are being challenged?
There are three parts of LAFRA being challenged. All three parts relate to the price calculation for a lease extension.
The first measure being challenged is the removal of the requirement on leaseholders with leases of less than 80 years to pay 50% of the marriage value to the freeholder.
The second measure being challenged is the exclusion of ground rents of more than 0.1% of the freehold vacant possession value from being included in the calculation of the price payable for the extension.
The third measure being challenged is the removal of the requirement for the leaseholder to pay the freeholder’s costs of an extension.
All of the freeholders except GRIF are challenging the marriage value measure. John Lyon’s Charity does not challenge the legal costs or 0.1% ground rent cap measures.
The John Lyon’s charity has made public statements that it has only pursued the proceedings because it wants an exemption from the marriage value reforms. If that is so then they have been badly advised (and no doubt very expensively so). The court has no power to give John Lyon’s Charity an exemption. It can only grant or refuse a declaration of incompatibility. The choice of whether John Lyon’s charity gets an exemption is a political one.
What is marriage value?
Marriage value is the notional profit that arises when a lease is extended. Currently this notional profit is split 50 / 50 between the freeholder and the leaseholder, with the leaseholder having to pay cash to the freeholder for its 50% share.
Linz Darlington has previously explained why the calculation of marriage value is deeply unfair:
What are the freeholders asking the court to do?
All six groups want the court to make a declaration of incompatibility under section 4 of the Human Rights Act 1998.
The freeholders claim that the measures violate their right to private property under Article 1 of Protocol 1 (“A1P1”) to the ECHR. They claim the measures are an expropriation of their property rights without adequate (or any) compensation.
Perhaps the fundamental problem with the freeholders’ argument is that they are still going to hold their freehold interests and they are going to be receiving some compensation, which will still be substantial, for the loss of ground rent and the extension of the term. Their A1P1 case stands or falls on whether this is regarded as proportionate compensation.
Another issue for the freeholders to counter is that their investment is essentially passive. They perform no real management function. All of the risk in the properties they own is on the leaseholders, as painfully demonstrated following Grenfell. I doubt any of them can actually demonstrate they paid a penny piece for the windfall values generated by the marriage value payments they currently receive.
What does the government say back?
The government says, in simple terms, that Parliament has made a democratic choice to enact these reforms after years of pressure to do so. The government says that Parliament enjoys a wide “margin of appreciation” to make laws in complicated areas of social policy and those choices should not be easily unpicked by the courts.
The government also says that the measures it has adopted are not a deprivation of the freeholder’s private property rights but a legitimate and proportionate control of the freeholders’ use of their freeholds.
How likely are the freeholders to succeed?
Making predictions is a mug’s game, but it is fair to say that the courts will be very reluctant to find an Act of Parliament incompatible with the ECHR. That is because we live in a democracy in which Parliament is elected and makes the laws. The courts are generally very reluctant to interfere with choices made by Parliament when passing laws.
There are also legal problems with the freeholders’ case. They all place great emphasis on two decisions of the ECHR involving Norway (called Lindheim and Karibu Foundation). These concerned a Norwegian law that allowed leases for plots of land to be renewed indefinitely at the same rent. In Lindheim the ECHR found that the legislation was incompatible. In Karibu the ECHR reviewed the law as revised after Lindheim, which allowed rent increases to be applied for the renewed term, and found that it was compatible.
The freeholders claim that this has moved the law on from a previous challenge (James v United Kingdom, which concerned the Leasehold Reform Act 1967). The freeholders say that the modern law is that they are entitled to market value for their assets and LAFRA will not provide that. They also claim that the removal of their right to a premium for ground rents above 0.1% of the property value
This is to ignore that the marriage value is a peculiar property right given to the freeholders in 1993 by previous Act of Parliament. Freeholders granting leases after 1993 will have demanded higher upfront premiums to compensate for the risk of the lease being extended. Unlike the compensation paid for the loss caused removing ground rent and extending the term of the lease, it is a right to share in the leaseholder’s notional profit.
And it is also to ignore the leases in Norway are very different to those in England and Wales. They do not appear to have been granted at a large premium when first granted, only ever being ground leases. Nor did they by terms transfer the entire burden for the upkeep of the buildings, and any improvements required, to the leaseholders via service charges.
The arguments in both Lindheim and Karibu centred around whether the extension at the same rent, or with an increasing rent, was A1P1 compatible. This is very different from the LAFRA case in which leaseholders will inevitably still be paying substantial premiums to extend their leases and to compensate freeholders for the removal of the ground rent and extension of the term.
And the ECHR found in both cases that it is for national legislatures to decide complicated social issues involving competing private law interests. Notably, even after the criticism in Lindheim of a ground rent of 0.2% not being “market value” in Karibu the ECHR found that a rent of 0.6% of market value was A1P1 compatible. Both rents were far below the “market value” of the plots.
Very recent developments in English law also suggest that the freeholders’ A1P1 arguments will struggle. Annington argued in 2023 that the government’s attempt to enfranchise Ministry of Defence married quarter properties one at time was a breach of its A1P1 rights and would cause it billions in losses. This argument was comprehensively rejected by the High Court.
Just last week the Court of Appeal found in Hippersley Point that part of the Building Safety Act, which prevents landlords demanding service charges for legal and professional fees incurred in relation to fixing safety defects is A1P1 compliant. That is so despite the measure preventing landlords recovering costs they paid out before 28 June 2022 from collecting them. The Court of Appeal unanimously found that this was a control of use, not a deprivation, and that it was A1P1 compliant because it was within the broad range of options open to Parliament to solve the terrible problems caused by the Grenfell Tower fire.
Notably Lord Justice Holgate gave the decision in Annington’s case and was one of the judges involved in Hippersley Point. That does not augur well for the freeholders.
Aside from the legal problems, the freeholders’ case on damages is also massively overcooked. GRIF, for example, claimed it could suffer losses of as much as £85 million. GRIF says this loss results from the 0.1% ground rent cap because about half of its portfolio has ground rents in excess of that. That is about the same as all of its assets are currently worth. Notably its most recent accounts estimate only a £6 million reduction in value of its assets from LAFRA.
So the freeholders will not get billions in compensation even if they win?
No. Assuming the government does not appeal (which is likely), it will then be up to Parliament to decide how and whether to change LAFRA to make it compatible with A1P1. Parliament could make changes that did not require compensation.
What could Parliament do instead of paying compensation?
Any change to LAFRA would be deeply unfair to leaseholders who have been promised by successive governments of both parties that they will benefit from these reforms. But they are less unattractive than using taxpayer money to pay compensation to ground rent investors.
Examples of changes that could be made are:
1) Limiting the removal of marriage value to leases with more than 80 years to run as at 24 May 2024, the date LAFRA was passed. That way nothing is being taken away from freeholders because it only affects their right to marriage value which had not crystallised at the date LAFRA was passed. This would leave leaseholders with short leases who cannot afford to pay marriage value trapped with no help from LAFRA. But perhaps they could be helped to extend their leases by means of targeted loans, which either the government could provide, or freeholders could be compelled to provide, at reasonable interest rates.
2) Limiting the removal of marriage value to leases made on or after 20 July 1993, which is when the Leasehold Reform, Housing and Urban Development Act 1993 was passed. That Act gave leaseholders of flats the right to extend their leases and Parliament decided marriage value should be payable for extending leases below 80 years. Theoretically leaseholders who bought after 1993 paid more at the start of their leases because they had the right to extend than leaseholders who bought before 1993.
3) Exempting certain freeholders from the reforms, such as charitable bodies, but only for freeholds they owned as at the date LAFRA was passed. A further alternative would be to limit the value of leaseholds eligible for the reforms so as to exclude very high value properties.
4) Limiting the removal of marriage value to leaseholders who own no more than 3 flats. This has already caused problems when implemented in relation to “qualifying leaseholders” and the Building Safety Act 2022.
The above are suggested only because the Court of Appeal in Adriatic Land 5 Limited v Leaseholders of Hippersley Point has recently found that drawing a line at a particular point in time, even where it affects accrued legal rights, can be A1P1 compliant.
How often are declarations made?
Rarely. By late 2024 there had only been 52 declarations of incompatibility since the Human Rights Act came into force in July 2000. Of the 52, 12 were overturned on appeal. For the remainder Parliament has amended the offending law to remove the incompatibility.
Usually the courts will try to interpret the law in a way that is consistent with the ECHR without making a declaration of incompatibility.
What happens if the freeholders win and a declaration is made?
It is likely the government would appeal the declaration. It is the government’s duty to do so. We live in a democracy in which laws are made by Parliament and not by the courts. The government has also challenged almost all of the other declarations of incompatibility on appeal. It has usually succeeded on appeal.
Even if the declaration of incompatibility holds up it would be up to the government to ask Parliament to pass an amended version of LAFRA that was A1P1 compatible. That is likely to take at least months, but possibly a year or more.
What happens if the government wins and the declaration is not made?
It is likely the freeholders will appeal. They all claim this is going to cost them collectively hundreds of millions, so they have a strong incentive to appeal.
Where would the appeal be heard?
The case is being heard by a Divisional Court (one Court of Appeal judge and one High Court judge). That may mean an appeal can go straight to the Supreme Court without going to the Court of Appeal first.
Can there be a further appeal after the Supreme Court?
Yes, if the Supreme Court refuses to make a declaration of incompatibility the freeholders could make a further appeal to the European Court of Human Rights.
All of the freeholders have already tried to take cases to the European Court of Human Rights but have apparently been refused because they have to exhaust the English courts first.
How long would an appeal take?
It depends on whether the appeal goes through the Court of Appeal or goes straight to the Supreme Court. It is being heard by a Divisional Court so could potentially leapfrog to the Supreme Court.
If there is an appeal to the Court of Appeal first then this will add at least 12 to 18 months before there is a decision.
If there is a leapfrog appeal to the Supreme Court then it will be at least 12 to 18 months before there is a decision.
So it will be at least 12 to 18 months (and perhaps double) to exhaust the English court process.
The time could be cut back if either the Court of Appeal or Supreme Court is persuaded to hear the appeal on an expedited basis, but that would still take at least 6 months or so.
An appeal to the European Court of Human Rights would take at least a year.
Potentially there could be anywhere between another 1 and 5 years of litigation before this issue is resolved.
Why can the government not just get on with implementing LAFRA regardless?
Probably the main reason is because all of the freeholders have reserved the right to sue the government for damages if it implements any part of LAFRA before the judicial review challenge is resolved.
LAFRA depends on further legislation, called statutory instruments, to implement the reforms being challenged in these proceedings.
One of the key LAFRA reforms is to fix the rates to be used to establish the price to be paid for a lease extension.
At the end of 2024 the government said it would publish a consultation on the new rates to be used to calculate the price payable. It said this would be published in the summer of 2025. It has not done so, which is disappointing news for many leaseholders.
That is probably the right choice. Any move by the government to move will be seized upon by the freeholders and used against them in the litigation. There has already been an example of that. In April the government published an update impact assessment that said costs of LAFRA would be higher than first expected. The freeholders have deployed that in this court case as further evidence that the measures are not A1P1 compatible.
I say it is probably the right choice because I think it is inevitable the freeholders are going to challenge the statutory instrument setting the new rates regardless. Even if they lose this challenge they can potentially have another go at saying the rates actually set are not A1P1 compatible. That would depend on how the eventual decision of the courts is framed, but some of them (Cadogan for example) have certainly tried to challenge the human rights compatibility of leasehold legislation even after James v. United Kingdom.
So the freeholders are succeeding in delaying everything?
Yes. That is no doubt one of their strategic aims: to hold up the implementation of LAFRA for as long as possible. That helps them to preserve their incomes. They are also hoping, as has happened so many times in the past, that the government will lose interest in the reforms because it is too hard to get anything done.
What is the ECHR? I thought we had left the European Union?
The ECHR is the product of the 1948 Congress of Europe, attended by Sir Winston Churchill, Konrad Adenauer and François Mitterand, among others. It was drafted between 1948 and 1950 and came into force in 1953. It predates the European Union. The ECHR is administered by a body called the Council of Europe. Disputes between citizens and states are determined by the European Court of Human Rights.
David Maxwell-Fyfe, a prosecutor at Nuremberg and later a Conservative Home Secretary 1951-54 and Lord Chancellor 1954-1962, was one of the main draftsmen of the ECHR.
The United Kingdom remained a part of the Council of Europe after leaving the European Union with effect from 2020.
Since July 2000 the ECHR has been directly effective in English law under the Human Rights Act 1998. Prior to July 2000 the English courts had to have regard to the ECHR’s decisions. After July 2000 they had a duty to apply the ECHR when interpreting English law.
Who owns the freeholders?
There is little public information available about the true (or beneficial) ownership of most of the freeholders.
It is well known that the Grosvenor Estate and Cadogan Estates are owned by family trusts for the benefit of the Duke of Westminster and the Earl of Cadogan respectively. The Duke of Westminster and the Earl of Cadogan are the heads of some of the richest families in Britain.
John Lyon’s Charity and the Portal Trust are charitable trusts.
ARC Time is a unit trust with no obligation to publish information about its investors, who may not be based in the UK at all.
GRIF is publicly traded. Its largest shareholders are institutional investors holding shares on behalf of unnamed third parties.
GRIF’s second largest shareholder, with a stake of about 11%, is Gracefavour Limited. Gracefavour is part of Compton Group, owned by Peter Ballard and his family. The Compton Group is a ground rent investor in its own right. Interestingly Gracefavour only began building its stake in GRIF in June 2024, after LAFRA was passed. Gracefavour’s stake is currently worth about £3.5 million. Evidently not all ground rent investors think LAFRA is the end of their game.
Another major shareholder in GRIF is Mark Hawthornthwaite (aka Mark Hawthorn), who has a stake of about 1 or 2%. Mr. Hawthornthwaite’s stake was larger. In January and February 2025 he sold 2 million of his original 3 million shares (about £640,000 worth).
PGIM is a large American investment manager which claims to manage more than $1 trillion of assets on behalf of its clients. PGIM’s ground rent investments are owned by two different PGIM real estate investment funds. It is unknown who the investors in PGIM’s funds are.
The claimants under Long Harbour are all legally owned by one of three Irish companies, Boardwalk Finance DAC, Jetty Finance DAC and Promenade Finance DAC. In turn those companies are owned by Irish charitable trusts. The three Irish companies have all borrowed money from various Irish investment funds organised by M&G Asset Management. The investors in the underlying M&G funds are not named publicly.
Long Harbour itself is ultimately legally owned by a Jersey company called Baffin Holdings. There is no public information available about the legal or beneficial ownership of Jersey companies. Long Harbour’s publicity has previously referred to receiving equity investments from Li Ka-Shing’s CK Hutchison Holdings and two Canadian public sector pension schemes.
Albanwise Wallace is ultimately legally owned by Gibraltar company, Perseverance Limited. Its accounts are not available publicly. It is acknowledged publicly that the Gibraltar company is part of a trust for Italian former investment banker Count Luca Rinaldi Padulli.
The bottom line
The government and freeholders are locked in a court case that is likely to drag on for years.
The freeholders seem not to see (or to want to see) how unattractive it is for some of the richest organisations in Britain (if not the world) to be bleating about their human rights infringed. Particularly given many of the largest freeholders are in shady offshore jurisdictions.
The only certainty is that this process will be expensive and long drawn out. There will be no real progress on LAFRA until this case is resolved.
Relevant legal documents:
LKP’s argument to intervene in judicial review with witness statements from Sir Peter Bottomley and Sebastian O’Kelly:
https://www.leaseholdknowledge.com/wp-content/uploads/2025/07/LKP-position-statement-22-May-2025.pdf
https://www.leaseholdknowledge.com/wp-content/uploads/2025/07/LKP-position-statement-22-May-2025.pdf
https://www.leaseholdknowledge.com/wp-content/uploads/2025/07/2025.04.08-Exhibit-SOK2-as-filed.pdf
https://www.leaseholdknowledge.com/wp-content/uploads/2025/07/2025.04.08-Exhibit-PB1.pdf
https://www.leaseholdknowledge.com/wp-content/uploads/2025/07/2025.02.25-Exhibit-SOK1.pdf
https://www.leaseholdknowledge.com/wp-content/uploads/2025/07/2025.04.08-Exhibit-PB1-1.pdf
Free Leaseholders’ argument to intervene in judicial review:
Freehold owners joint position statement to the interventions:
ARC Time and JB Leitch
Related posts:
Freeholders on course for judicial review showdown against leasehold reforms in January
Leaseholders blocked from intervening against freeholders’ judicial review against reforms
Judicial Review Day 1: Bad start for freeholders but three days to go
Freeholders win right for a judicial review to challenge 2024 Act
Freehold owning charity in judicial review says ‘disastrous’ leasehold reforms will benefit millionaires and deprive poor children
What the accounts say … St John’s Wood leasehold estate is worth only 8% of the £380m John Lyon’s Charity
The Government is keen to see inward investment in the UK
Does it help their case to be seen interfering with contractual terms agreed by all parties with legal representation . I agree that pernicious ground rent need to be amended ( i.e. 10 year doublers) , but if a leaseholder takes a grant of a new lease with a ground rent of say £500 on a flat worth £350k, why should that contract be interfered with ? As the NPV of the ground rent is not shown next to the premium, I can see the argument that many leaseholders did not appreciate what they value could be. A ground rent of £350 doubling every 10 yrs for the first 6 anniversaries and that flat lining over a term of 125 years has a NPV of £32k . If that was changed so the rent rises by the lower of inflation or what was planned in the lease then it becomes around £10k – I think most reasonable leaseholders would see that as fair. They knew the rent was at outset – obviously- and recognized that it would go up in line with inflation as do incomes and pensions so that type of linking is broadly acceptable – any BTL landlord tries to keep their rent in line with inflation – but rising at a rate far higher than average inflation is clearly not acceptable. This proposal addresses that
Therefore, if ground rent terms were changed so that on every review the rent rose by the lower of inflation or what was planned in the lease, then the rent in real terms never gets bigger over the entire term . My understanding is that investors would be agreeable to that type of proposal
It is claimed that the purpose of the Act was to make enfranchisement cheaper, so leaseholders could control the building more easily, but with the RTM legislation improved this is a much cheaper and quicker option. Also, if the leaseholders is only extending then its not in pursuance of enfranchisement
The marriage value cut off at say 1993 would be logical as this would not take away previously agreed compensation to address human rights at the time
I would also see it logical that if a freeholder acquired their interest post 1993 that they pay their own legal costs as this was a real possibility when they acquired their interest
Please reply to my many previous posts to you with evidence?
Ground rent provisions constitute a fundamental component of the total financial arrangement that a landlord anticipates when presenting a property for sale under leasehold terms.
If the freeholder secured a better overall price by structuring the deal this way—perhaps 3% to 5% more—that reflects a free market economy. Unless the terms are clearly exploitative, such as 10- or 15-year doublers, they should be upheld.
Otherwise, contracts could be subject to renegotiation many years later based on assertions that the agreed price is now considered unfair by a small margin after further scrutiny.
Stephen is an all too obvious troll for freeholder
I make no secret that I am a freeholder, my posts seek to put forward a coherent counterargument in the hope that it generates a thoughtful and respectful dialogue.
By understanding what the counterargument is, it enables you to formulate your views better or possibly give you the opportunity to concede that there might be merit in what the other side have to say.
For example, I have changed my view on marriage value applying to post 1993 leases I would also concede that a landlord should carry their own costs in an enfranchisement/lease extension claim if they acquired their interest post 1993
Great comprehensive article.
The facts are the same – only this poxy little country has residential Leasehold and it is in the Public Interest of 5m people to get rid of it.
Ireland had the same challenges but it didn’t stop their reforms and of compensation as a multiple of ground rent. Ditto Scotland. The obstacle here is entrenched Establishment collusion with the wealthy beneficiaries enabled by a ridiculous out of date legal system.
In the Norwegian case the judges were amazed at the numbers of ground rents – wait till they hear about the 5m here! Plus they allowed the same ruling to apply to second homes! Apparently a fundamental Norwegian right. The adjustment up wasn’t very much. They were not entitled to a market price.
In fact it doesn’t matter even if the judge found In their favour. It’s a test of our judges integrity too considering they will know about other Human Rights cases in the ECHR.
A government can do what it sees fit in the Public Interest and can change the law to suit its plans. Especially with this majority and MPs on board.
The real suspicion is that Labour will use any Freeholder win as an excuse not to fulfill its promise of cheaper and much cheaper Enfranchisement and lease extension costs.
In the The CASE OF JAMES AND OTHERS v. THE UNITED KINGDOM in 1986 the judges make clear that they do not have an HR to a particular level of compensation. And Marrage Value didn’t exist then and neither were there 5m people trapped!! Now they demanding even more miney for nothing than back then. It’s an additional burden in us that gives weight to the exploitation argument.
Other judgements on parallel rent issues have always been upheld in the Public Interest. Thete aren’t too many on Leasehold and ground rents because we are the last bastion!!
Justice delayed is Justice denied. There are massive injustices in Little Englan the backwater of Europe.
No way to edit a reply! Typos.
Leasehold is not true Home Ownership. Nobody signed up to be a cash cow for someone else. Nobody signed up to those insanely complicated laws that govern the whole thing. Nobody should be subject to them. It’s beyond reasonable or rational to keep such a system. Which is why nobody else has it and are appalled at the idea. Who would swap Freehold for Leasehold?! The advantages of Leasehold over Freehold are…none! Time to move into the 21st century like every other country in the West.
I doubt potential international investors in the UK would care about an obviously unfair system being reformed, given it’s already happened in their own country at some point in time.
You always repeat the same tired old points but completely fail to understand (intentionally no doubt given your snout is so deep in the trough) the root issue which is that the system itself is wrong. It wasn’t designed to be consumer friendly, quite the opposite. Despite the fact that both parties have had legal representation there is a very clear and obvious imbalance of power in the relationship, given home buying is an emotional decision often driven by need. The developer has superior flow of information and is more than happy to use it at the expense of the more naïve consumer – hence why protections are needed.
This idea that ground rents are truly part of a deferred price is not based in reality to be honest. Homebuyers would very rarely view it as such and thus the developers won’t either – rather they’ve just seen an opportunity to increase profits and grabbed it with both hands. If you believe I’m wrong here then consider why the developer chose this route rather than just increase the prices of the homes they sell? The answer is simple: They’re selling for market value already but want to make more money.
With RPI increases – especially with short review periods – the issues are obvious: short term spikes are unlikely to be matched by increase in income resulting in an unearned payday for the freeholder and greater financial burden for the leaseholder. If there was a prolonged period of very high inflation and incomes fail to match then a property could effectively be ruined as an asset. This is what makes the lenders twitchy. Plus the AST loophole, which is disgracefully still not resolved.
If ground rents as a concept were acceptable, why are they now outlawed in most cases? Presumably you agree with that change considering you hide behind the current law in your arguments – which, again, is a result of unfairness given the financial and power imbalance of the parties involved?
Ultimately sentiment among the general public is now that ground rents are toxic and to be avoided at all costs. Therefore they must go in order to keep the market moving else hundreds of thousands (millions?) of properties stay unsaleable. The industry has only itself to blame for reform.
*by the way I’m not completely against any compensation for ground rents, but a simple multiplier e.g. 10 times current ground rent should be sufficient rather than some nonsense calculation dreamed up by a valuer acting to extract the maximum value for his client.
Only a very small number of ground rents on leasehold flats are above and £500.
If regular reviews are conducted, it is possible that a sudden increase in inflation could result in a temporary lag before incomes adjust accordingly. However, the amounts involved are relatively minor. For example, with an annual ground rent of £500, a 15% inflation rate would increase the rent by £75 per year. Should wages and salaries take 12 months to catch up, the leaseholder would experience an inconvenience of £75 over that period. This impact is comparable to a parking fine or a penalty for entering a bus lane—unpleasant, but not financially significant.
A small number? That’s odd given that for the last couple of decades the norm has been to start ground rent at £250 – £500. One would imagine that a great many of those are now north of £500.
The amounts involved are indeed minor for a single year of high inflation. Compounded over a handful of years however and abruptly they are not. At the end of the day lenders are not stupid and if they’re now not happy with these clauses there will be a valid reason.
You can continue to tirelessly copy and paste the same old stories on every LKP article and all over twitter but ultimately you’re wasting your time as the racket is finally coming to an end.
Not based on my experience
But of course many will go over £500 due to inflation – but then incomes rise because of it – the state pension is linked to inflation
Few ground rents outpace inflation—mainly those doubling every 10 or 15 years, which accounts for about 10,000 of the 4.5 million leaseholds. Many of these are held by freeholders who have agreed with the CMA to adjust such rents.
Ground rents are deferred consideration contracts that can be purchased by investors. This practice assists developers in meeting their expected returns, potentially reducing the need to maximise proceeds from the sale of new leasehold properties.
Some campaigners argue that ground rent terms may be unnecessary, suggesting that the premium alone could provide sufficient compensation. Determining whether this is accurate would require a detailed analysis of the costs for each development and an application of profit margins. In many situations, such an assessment might involve reviewing historical data from previous decades.
Many campaigners, with professional advice, agreed to contract terms but later claimed a clause was unnecessary and accused the vendor of greed for charging rent – there is something rather distasteful about such an approach
Mines over £3,500 and with SC amounts to £5000 this year, and I’m one of 330 ground tenants.
Hi Stephan, what you say, I can see has been very carefully thought through…but, ground rent is a charge for NO SERVICE, how can this charge then be justified whatever the cost to a leaseholder?
If a developer sells four identical flats, then raises the price by £10k for the last two, can those final buyers claim the extra £10k offers no added value and request a refund?
No, the situation would be analogous if the same developer sold the first four properties with nominal ground rents and then imposed a higher ground rent on the last two. The purchasers of those two properties could also argue that such terms are unfair and not reflective of any additional services provided.
Ground rent constitutes a fundamental component of the financial arrangement pursued by developers upon sale. Essentially, ground rent serves as a form of deferred consideration and should only be subject to intervention if its terms are clearly unjust or designed to disadvantage leaseholders, such as clauses involving doubling every 10 or 15 years.
About 15 years ago we entered into a contract with our existing Landlord and Freeholder, a gentleman to extend our Lease. We had about 70 years left on our original Lease. We wanted to extend it to 125 years. We engaged a solicitor to advise us. That solicitor gave minimal advice about what the consequences could be. We had a Lease which defined our Ground Rent payments to be £75 per year, doubling every 33 years. The Landlord forced upon us a contract of doubling the Ground Rent every 25 years. The Solicitor advised us that she thought this was reasonable, and gave us no further legal advice what was possible. We are now governed by a Régime paying £150 per year.
No one advised us about the Statutory Route of Lease extension.
Stephen at 14 July 12.03 a.m.
The reason the UK has a productivity problem and stagnant growth is because too much capital is allocated to unproductive assets like ground rents. Ground rents produce nothing and do nothing to raise productivity. If we are to solve the productivity problem then we do not need any more domestic or international investment in passive investments like ground rents.
And you miss the point about the judicial review. No lease provides for the payment of marriage value or the freeholder’s legal costs on extension or enfranchisement. These have always been matters of statute. So there is no interference with the contract.
As to the 0.1% ground rent cap it is theoretically an interference with the contract, but given the statutory mechanism is a benefit to the landlord in capitalising an income stream otherwise payable over many years the legal question is whether it is proportionate to cap the value of ground rent that can be brought forward in this way. The Law Commission thought so.
As to ground rents generally, the CMA found when investigating doubling ground rents that there was no evidence of any adjustment in the premium to reflect the ground rent. All the objective evidence is that modern ground rents were created so developers got paid twice for the same land (once for the lease and again for selling the freehold with the ground rents). This is an investment class that has been systematically abused on an industrial scale by many of the parties to the judicial review and more beside. It is high time we did away with it.
Laim
Thank you for taking the time to respond
Ground rents represent deferred consideration. If these are modified, it suggests that the government is permitting changes to the total consideration paid by the original grantee of the lease, potentially many years after the initial transaction and following multiple assignments of the lease, during which purchasers were typically represented by professionals.
The leaseholder could contend that, while they are generally amenable to the ground rent, they prefer a capital sum as an alternative, given that the premium initially paid was excessive because of the ground rent reserved, and they seek its repayment with interest—despite not being the original grantee of the lease. This scenario demonstrates the absurdity of the demand to cap ground rent, although it is acknowledged that problematic ground rents should be appropriately addressed.
The 2024 Act exempts premiums that reflect the ground rent, meaning the cap doesn’t apply if this is the case. This I am sure will spark disputes between freeholders, claiming the premium included ground rent value, and leaseholders, arguing otherwise, both using various comparisons to support their positions. A practical solution would be to eliminate escalating rents—such as 10 or 15-year doublings—and instead tie any increases to the RPI or the lease’s terms, whichever is lower. This approach addresses problematic rents while respecting contract principles. If a lease is agreed with an initial rent, that amount should be paid, especially given professional advice and time for consideration. Historically, ground rents were much higher in real terms than they are today.
That’s legalism and old thinking based on these dysfunctional laws based on flawed and unjust thinking. What we want are completely new laws and thinking not referencing the current laws that should be abolished or at least superceded by completely new ones bringing us into line with modern Europe. Even LAFRA is obviously just amending the legal monstrosities that are Leasehold laws. No leasehold no Byzantine legal complexities that only lawyers can understand.
Well said!
I am now offering a new way of thinking about our situation as Leaseholders.
These Freeholders who have taken the Government to court are using the European Convention of Human Rights and it policy on Property Rights. These Rights give our Freeholders their full set of Property Rights over and above us.
Our Government and Parliament has the right to strengthen our Human Rights Laws to give us Leaseholders stronger possession rights.
The European Convention of Human Rights after several Fascist/Nazi Governments and Communist Governments in the East of Europe subsumed ownership of the properties of absentee landlords many of whom were Jewish.
After the war the Convention of Human Rights defined two types of property occupation in a collectively occupied block of apartments: (a) a fully owned property to which they gave full property ownership rights and (b) a occupied apartment which the residents only had the “Possession Rights” of a Home. The Former owned their own home outright: the Latter merely had the possession rights of a renter.
These were the common arrangements on the Continent of Europe. The Convention ignored the fact that UK [England and Wales, in particular, had a different Legal System regarding the sale and occupation of apartments in collectively occupied buildings, and their legal circumstances ─ Leasehold Properties.
It was the 1925 Property Act of Parliament which defined Leasehold. It defined it to be a long term kind of renting. But this Act defined our property rights to be much greater! we were to pay property taxes on our purchases of same. The whole system was the same as anyone occupying a Freehold property. But none of this was taken into account by the European Law of Human Rights. This system of ownership was not understood by them. It did not exist on the European Continent.
Since then our “ownership rights” have been considered as minimal, merely rights to occupy our Homes for a period of time.
I say we have greater rights because we pay the Government taxes, Stamp Duties, as if we were the full owners of a Real Estate when we sign up to a Lease. The Government can’t have it two ways. A Renter pays no Stamp Duty; a Leaseholder pays Stamp Duty stating the full amount we have invested in our Homes. We are owners of Property under the Law of Property Act (1925).
Starmer’s Government: get on with recognising our Human “Property Rights”!!!!
The Law Commission and CMA criticized ground rent in the UK as
Unfair and Onerous: Escalating ground rents (e.g., doubling clauses) create unaffordable costs, trapping leaseholders in unsellable or unmortgageable properties.
Lack of Value: Provides no tangible service or benefit to leaseholders, serving mainly as a profit stream for freeholders/investors.
Outdated System: A feudal relic that disadvantages leaseholders, with complex terms leading to unfair consumer practices.
If there was a nil ground rent and upon detailed investigation it was found that the premium paid was, £10k more than it should have been if the usual industry profit percentages used – would there be claims that the extra £10,000 was for no tangible service or benefit and a demand for a refund ?
It is patently clear from the lease that the ground rent is for no service and a pure profit stream for the developer/freeholder – it is for the purchaser to form an opinion whether the obligation to pay the rent plus the premium makes for an acceptable bargain when the lease is being reviewed prior to purchase
What if the premium results in the developer making a loss – then the ground rent is there to help pay towards the construction costs
That’s not what the Law Commission or the CMA sees. It’s money for nothing – a fairly recent development as older leases like mine were peppercorn. When you read the sales pitch on Ground Rent sales sites they make no bones about its purpose. Brings in billions nowadays but not previously.
It is a fallacy to suggest that the Government is interfering with Contract law through the legal reforms. What does marriage value have got anything to do with Contract law. Marriage value originates from LRHUD Act 1993 of Parliament and therefore it is only right that the Parliament can repeal marriage value to ensure fairness in the law.
In 1993, the landlords’ reversionary interests were affected. The value of the flats increased as leaseholders acquired a statutory right to extend their leases. This situation was addressed through a sharing of the marriage value generated, which was ultimately agreed to be divided equally between parties.
The proposed removal of marriage value from the formula eliminates compensation that was previously included. However, for leases granted after 1993, the agreed premium between the parties already reflected the leaseholder’s statutory right to extend, so I agree with the logic of not applying marriage value in these cases when such leases are extended.
Not agreed by us! Did anybody consult the victims? No. Again, they do not “deserve” anything other than what vested interests made unto dodgy laws have created. We pay the market price for our himes but they keep ownership bought for usually a multiple of the ground rent so depriving the rightful owners of true Ownership. It’s a rigged system that is clearly exploitation.
Yes Kev, I won’t be happy with anything less than leasehold abolition. It’s right and fair. Let’s join the rest of the world why don’t we? It’s time and totally well overdue.
It’s a pity these JR proceedings aren’t being broadcast. There is a precedent for doing so following a recent hearing in Manchester.
I contacted my MP Emily Thornberry and asked if she could help. No response, which is surprising bearing in mind that her late father-in-law, Edward Nugee was heavily involved in the 1980’s leasehold reform legislation. I also similarly contacted a member of the APPG. Again, no response. Sad that.
Jack
Yes, I’d love them to be public to. There are still so many leaseholders out there that have no idea what’s happening or what they have purchased and what they may face in the future.
It seems to me as a an eighty-seven year ‘oldie’ that no-one is knowledgeable about ‘half-share’ owners’ who half-bought their (first-class flats with BPHA but who also pay vast rent costs There’s ony two of us in our block of seventy flats although ‘affordable renters’ whatever that means, are also paying after six years twelve thousand pounds per year. On top of the £203,000 ‘deposit’ which I paid when I moved in. I understand from the general debate that the government is planning to amend this rule in 1930.and although I took the housing society to the Ombedsman four years ago the case was thrown out. With no information about where one goes from here. Can anyone help please or who is a similar position. Peter Durrant.
Hi Peter, well done you for trying to right a wrong, it’s totally exasperating isn’t it?
Excellent if somewhat depressing analysis by Liam Spender again – How the wealthy few can use lawfare to overide the interests of the vast majority. Marriage value is a horribly flawed concept as Linz Darlington says in his piece. Another thing not mentioned re marriage value is that leaseholders (past and present) usually have a much greater financial interest in the property compared to the freeholder (as well as paying to maintain and improve it over time). So why then should a minority shareholder, in this case the freeholder, get 50% of any increase in value where leases are below 80 years ?
The inevitable result of all these delays, combined with defective buildings will depress the leasehold market further with less people owning property and more renting.
As usual Simon you are so right and hit the nail on the head! The leasehold mark will be effected, so these are usually the first time buyers of lease , so it will clog up the property market!
I’m reading that the Government can speed up hearings by working with the Courts on the grounds of Public Interest. Depends of whether they think we are important enough. And they did do that over HS2. There is always a way if there is a will…
As far as I’m aware there is no ‘marriage’ (merger) of the leasehold & the freehold interests when a lease is extended.
Assuming this is correct – and legally relevant – should marriage value & it’s sharing apply to lease extensions?
In a lease extension, even though the freehold and leasehold interests don’t merge, marriage value is deemed appropriate because the combined value of the extended lease and freehold is greater than the sum of their values separately
In a lease extension, even though the freehold and leasehold interests don’t merge, marriage value is deemed appropriate because the combined value of the extended lease and freehold is greater than the sum of their values separately
A Lease is a depreciating asset. Who deemed that marriage value is appropriate? Who are the partys to that agreement? Who were the Leaseholders who agreed to this?
We should direct all people considering purchasing a leasehold property to this post. When it is claimed leasehold is home ownership we can point ot the phrase “the measures are an expropriation of their property rights without adequate (or any) compensation.” Meaning that the property you live in is indeed in the ownership of the freeholder.
I’m confused – I always thought that ‘Human rights’ under the ECHR only attached to individuals? How can an organisation albeit a charitable trust or corporate acquire such rights?
Companies do have “human rights” if they can show the company is being violated, but that should not overrule the “human rights” of the persons the company may be violating.
Thanks for the clarification!
All land and property should be freehold.