R (ARC TIME Freehold Income Authorised Fund & Others) v Secretary of State for Housing, Communities and Local Government [2025] EWHC 2751 (Admin)

Conjoined judicial review claims brought by leading London estates, institutional landlords and charitable freeholders — including Cadogan, Grosvenor, the ARC TIME funds, Abacus/Wallace, John Lyon’s Charity and the Portal Trust.

The claimants challenged key parts of the Leasehold and Freehold Reform Act 2024 (“LFRA2024”) on the basis that the proposed changes to enfranchisement valuation were incompatible with Article 1 of Protocol 1 of the European Convention on Human Rights (A1P1), which protects the right to peaceful enjoyment of possessions.

The reforms under challenge — none of which have yet been brought into force — include:

• a ground rent cap limiting the rent input for valuation purposes to 0.1% of the freehold vacant possession value;
•  the abolition of marriage value; and
• the removal of the landlord’s entitlement to recover non-litigation costs (valuation and conveyancing fees) from tenants.

The freeholders argued that these reforms would dramatically reduce compensation payable on enfranchisement and were therefore an unfair and disproportionate interference with property rights.

The Court accepted that the changes would have a substantial financial effect on many landlords, particularly long-established and charitable estates. However, it concluded that Parliament was entitled to pursue its policy of making enfranchisement “cheaper and simpler,” and that the proposed measures represented a defensible policy decision within Parliament’s discretion. In other words, although the Court recognised that the evidence base for some elements was limited, it considered that Parliament was permitted to take the view that these reforms would make the system fairer and more efficient.

The 0.1% ground rent cap was held to be a defensible policy decision despite the lack of detailed market data supporting that particular figure. The abolition of marriage value was also upheld: the Court accepted the Government’s reasoning that marriage value arises from the wasting nature of leases and that its removal would address perceived imbalance between landlords and leaseholders. Similarly, the decision to prevent landlords from recovering their non-litigation costs was found to fall within the range of legitimate policy choices open to Parliament.

Arguments that charities and long-term investment estates should be treated differently were rejected, the Court holding that exemptions would undermine the consistency of the new regime. A separate issue concerning the treatment of intermediate leases was not decided and remains stayed pending further legislation.

Although the ruling is a clear first-instance win for the Government, the claimants have indicated an intention to seek permission to appeal, arguing that the reforms go beyond what can fairly be justified under A1P1 and fail to provide compensation reasonably related to market value.

For now, it is important to emphasise that the LFRA 2024 valuation provisions are not yet in force. Enfranchisement continues to be governed by the Leasehold Reform, Housing and Urban Development Act 1993, under which marriage value still applies and landlords may recover their reasonable valuation and conveyancing costs. The property industry now awaits the Government’s promised consultation on the rates and discount assumptions to be used under LFRA 2024 before the new valuation regime can be implemented.

Until that consultation is completed and commencement provisions are made, the 1993 Act remains the prevailing law.