ARC Time v Secretary of State: High Court upholds leasehold reforms against human rights challenge

The High Court has dismissed a comprehensive legal challenge to the Leasehold and Freehold Reform Act 2024, ruling that controversial reforms to ground rent, marriage value and costs recovery remain compatible with human rights protections. The judgement, handed down by Lord Justice Holgate and Mr Justice Foxton on 24 October 2025, marks a significant victory for the Government's leasehold reform agenda.

Six groups of claimants, including major estate owners Cadogan and Grosvenor, charitable institutions, and investment funds, mounted separate judicial review proceedings challenging three core measures within the legislation. The claimants argued that the Ground Rent Cap (limiting ground rent calculations to 0.1% of freehold vacant possession value), the abolition of marriage value in enfranchisement claims, and reforms shifting costs burdens to landlords constituted disproportionate interference with their property rights under Article 1 of the First Protocol to the European Convention on Human Rights.

The claimants contended that these reforms would result in enfranchisement premiums falling substantially below market value, amounting to an unjustified deprivation of property. They sought declarations of incompatibility under section 4 of the Human Rights Act 1998, with some proposing that any such declaration should apply to all freeholders, whilst others argued for exemptions limited to specific categories, such as charitable landlords or business leases.

The court examined the extensive legislative history underpinning the reforms, tracing developments from the Law Commission's consultation papers through to parliamentary debates and impact assessments. Central to the Government's case was the identification of the "wasting asset problem" inherent in the leasehold system, whereby leaseholders face escalating costs to renew leases as their terms diminish, creating substantial barriers to home ownership and distortions in the housing market.

Lord Justice Holgate and Mr Justice Foxton concluded that Parliament had properly identified legitimate aims in the public interest, including addressing exploitative practices in the leasehold market, facilitating homeownership, and remedying what the Competition and Markets Authority had characterised as market failures. The court determined that the measures fell within Parliament's wide margin of appreciation when balancing competing interests, noting that the reforms did not constitute confiscation but rather modified the basis for calculating compensation within an established statutory framework.

Critically, the judgement found that the legislation's approach remained "reasonably related to market value," even where significant reductions in enfranchisement premiums would result. The court rejected arguments that exemptions should have been carved out for institutional investors, charities, or business leases, holding that Parliament was entitled to adopt a comprehensive approach rather than creating complex categorical distinctions that might undermine the reforms' objectives.

The court also dismissed contentions that the reforms constituted indirect discrimination requiring justification under Article 14 ECHR in conjunction with Article 1 Protocol 1. The judges found that any differential impact on particular groups arose from neutral application of the new valuation methodology rather than targeting specific categories of freeholder.

The decision preserves the Government's timetable for implementing the reforms, which represent the most substantial restructuring of leasehold enfranchisement since the original Leasehold Reform Act 1967. The judgement spans over 550 paragraphs and provides detailed analysis of European Court of Human Rights jurisprudence, particularly the landmark James v United Kingdom decision, whilst affirming domestic courts' approach to proportionality assessment in property rights cases.

All six claims were dismissed, with the court declining to make any declaration of incompatibility. The judgement acknowledges the significant financial implications for freeholders whilst affirming Parliament's authority to rebalance property interests in pursuit of housing policy objectives.