Freeholders bring challenge to leasehold reforms to High Court

A judicial review brought by freeholders against the government’s attempts to reform the leasehold system starts in the High Court today.

Six groups of nine freeholders who collectively own 390,000 leasehold flats and houses across England and Wales are bringing the action, some of whom argue that the Leasehold and Freehold Reform Act law passed last year breaches their human rights.

The freeholders include The ARC Group, which consists of the ARC Time Freehold Income Authorised Fund, the Ground Rents Income Fund and PGIM; The Cadogan and Grosvenor Group; Long Harbour and Albanwise Wallace. 

Two charitable trusts, John Lyon’s Charity and The Portal Trust (formerly the Sir John Cass Foundation), are also bringing claims.

There are an estimated 4.5 million leasehold properties in England and Wales. Scotland abolished the leasehold system in the 1980s. 

The Leasehold and Freehold Reform Act 2024 was passed by the outgoing Conservative government with support from the then opposition Labour Party.

The Act seeks to make it cheaper and easier for leaseholders in houses and flats to extend their lease or buy their freehold, including by removing the requirement to pay marriage value.

>>See also: MHCLG publishes consultation on leasehold reform

>>See also: Cost of leasehold reforms rises to £4bn after government updates impact assessment

It also increases the standard lease extension term to 990 years, with ground rent reduced to a peppercorn; and it bans the granting of new leasehold houses (with some exceptions).

The reforms were fast-tracked through Parliament before last year’s general election.

Some of the freeholders involved in the judicial review claim this legislation breaches their right to enjoy private property as enshrined in the European Convention of Human Rights. 

The charities involved in the action say they are supportive of leasehold reform but argue the changes to marriage value will hit their income and impede their charitable work. Other charities, including the National Trust, have exemptions from the leasehold reforms, which these charities are arguing should be extended to their work.

Several of the freeholders are challenging the government’s reforms over calculations for the cost of lease extensions claiming they could lose hundreds of millions of pounds.

Today’s hearing starts at 10.30am and is expected to last until Friday.

Campaign groups for leaseholders say they fear the legal challenge could delay the implementation of the Leasehold and Freehold Reform Act for years.

Separately, the government is currently consulting on strengthening leaseholder protections over transparency of services and service charges.