Government triumphs in landmark leasehold case

The government has achieved a notable success in the legal landscape regarding leasehold law reform, as it defended a challenge posed by a consortium of major freeholders against the Leasehold and Freehold Reform Act (LAFRA) 2024. This pivotal ruling, which unfolded during a judicial review held from 15 to 18 July, involved several prominent freeholders, including Arc Time Freehold Income Authorised Fund, Alpha Real Capital LLP, and Grosvenor Limited, among others.

Mark Chick, ALEP director and Senior Partner at Bishop & Sewell LLP, commented on the case’s implications, stating that “at the centre of the dispute were unimplemented sections of LAFRA, specifically those relating to the removal of marriage value.” The freeholders contended that the removal of marriage value, which significantly impacts the calculation of premiums for lease extensions and freehold purchases, constituted a violation of their human rights. They argued that this abrogation amounted to taking their property without fair compensation.

The High Court’s ruling ultimately rejected the freeholders’ claims, concluding that the government’s stance was lawful and proportionate. This decision clears a path for the government to proceed with implementing the remaining provisions of LAFRA, which had been on hold awaiting the resolution of this legal challenge. Highlighting the significance of this judgment, Chick pointed out that “the decision is widely seen as a necessary step in clarifying the legal position around leasehold enfranchisement and is essential to advancing future reforms.”

The outcome of this case, viewed as a key milestone for the government’s reform agenda, raises questions about future actions. There is speculation that the freeholders may seek leave to appeal the decision, potentially escalating the matter to the European Court of Human Rights. This uncertainty fuels concerns regarding the timing of the anticipated Draft Bill, which was initially set for release in autumn but may now face further delays.

While the government may feel liberated to implement LAFRA’s remaining provisions, the path ahead is fraught with potential legal obstacles. As Chick noted, it would be “a bold move given that it’s more than likely that this was simply a first-instance decision.” Stakeholders in the legal, property, and political sectors are likely to closely monitor developments, as the ruling both endorses governmental reforms and leaves open critical questions pertaining to the future of leasehold reform in the UK.