Leasehold Reform in 2025: What can Freeholders who object do?

The High Court has granted permission for a judicial review of key provisions in the Leasehold and Freehold Reform Act 2024. This decision allows freeholders to challenge reforms that threaten their income streams. A hearing is scheduled for before the end of July 2025.

This ruling marks the initial stage of legal proceedings, where the court assesses whether there is an arguable case. The court found that the freeholders’ challenge met the required threshold, which is intentionally low. Legal experts note that this outcome should not be viewed as unexpected or a setback for leasehold reform advocates.

Judicial review on leasehold reform: What is the scope?

Judicial review on leasehold reform: What is the scope?

The judicial review will focus on several contentious aspects of the 2024 Act. These include the introduction of caps on existing ground rents, abolishing marriage value payments when enfranchisement rights are exercised, and removing freeholders' rights to recover reasonable legal and valuation costs in enfranchisement or lease extension claims. Freeholders argue that these changes breach their private property rights as protected by Article 1 of Protocol 1 (A1P1) of the Human Rights Act 1998. As noted by Lord Sales in the 2019 case of Maharaj v Petroleum Company of Trinidad and Tobago Ltd, the threshold for granting leave for judicial review is low. This legal principle underscores why the court’s decision to permit the review should not come as a surprise.

Which Freeholders are opposing the governments stance on leasehold reform?

Which Freeholders are opposing the governments stance on leasehold reform?

The case involves a diverse group of stakeholders. Residential freeholders, including investors from the Long Harbour, Wallace Estates, and ARC Time Freehold Income Fund, have joined the challenge. Prominent London aristocratic estates such as Grosvenor and Cadogan and charitable organisations like the Portal Trust and John Lyon’s Charity are also affected.

Human Rights and Leasehold Reform:  What are the issues?

The case raises questions about the balance between leaseholder protections and property rights under the Human Rights Act. A1P1, introduced by a Labour government in 1998, safeguards the right to peaceful enjoyment of possessions. It has historically protected vulnerable individuals, including victims of domestic abuse who faced challenges related to the bedroom tax.

Financial impact of Leasehold Reform: Freehold Reform Act 2024

The 2024 Act has significant financial implications. The government’s Impact Assessment estimated losses exceeding £1.9 billion in the first decade due to the abolition of marriage value payments alone.Freeholders claim their combined losses could range between £289 million and £404 million, highlighting the economic stakes involved in the legal battle.

Before the Act was passed, the possibility of a legal challenge was widely anticipated. On January 15, 2024, Professor Susan Bright from Oxford University and barrister Dr Douglas Maxwell addressed the All-Party Parliamentary Group on leasehold and commonhold reform. They highlighted existing case law, demonstrating that compensation for property deprivation does not always need to reflect market value.

During parliamentary debates, Clive Betts predicted that any legal challenge would likely fail. However, some Conservative peers argued that the reforms represented an unlawful confiscation of property rights. Despite these warnings, the government proceeded with the legislative changes. If freeholders succeed in their judicial review, Parliament may need to introduce new primary legislation to continue leasehold reforms. Alternatively, if the government prevails, it will proceed with the secondary legislation programme announced in November. The outcome could influence whether further legal challenges emerge after the enactment of secondary legislation.

Freehold Reform Act 2024:  what are the central issues?

One of the central issues in the reform process is enfranchisement—the amount leaseholders must pay to buy out a freeholder’s interest. This complex issue has long been a point of contention and has frequently led to court disputes.

Despite legal hurdles, campaigners remain hopeful. After over ten years of effort by the Leasehold Knowledge Partnership (LKP), the National Leasehold Campaign, and support from MPs across parties, many believe abolishing the leasehold system is inevitable. The current judicial review is viewed as a temporary setback, not a final barrier. Leaseholders may feel frustrated by slow reform progress. However, legal experts note that such challenges are part of significant changes to property rights. The outcome of the judicial review will be crucial for leasehold reform in the UK.

FAQs:

What is judicial review?

Judicial review is a legal process through which a person (the applicant) can challenge a decision made by a public body.

What is the purpose of the judicial review?

The judicial review will assess whether the Leasehold and Freehold Reform Act 2024 breaches freeholders’ property rights under the Human Rights Act 1998.

What are the key provisions being challenged?

Freeholders are contesting the cap on ground rents, removing marriage value payments, and eliminating legal cost recovery rights in enfranchisement claims.

What happens if the freeholders win the case?

If freeholders succeed, Parliament may need to introduce new legislation to continue leasehold reforms. If the government wins, it will proceed with its secondary legislation programme.