Leasehold Reform Challenge Rejected
Key Takeaways for Homeowners and Freeholders
(Based on ARC Time Freehold Income Authorised Fund & Ors v Secretary of State for Housing, Communities and Local Government [2025] EWHC 2751 (Admin))
The Divisional Court has issued a major judgment on the Leasehold and Freehold Reform Act 2024, confirming that the Government’s updated enfranchisement rules do not breach Article 1 of Protocol 1 (A1P1) of the European Convention on Human Rights. Enfranchisement is the statutory process that enables long – leaseholders to either extend their lease or acquire the freehold of their property by paying a ‘premium’ (the amount a leaseholder must pay). The premium is calculated using rules set by the legislation. Below is a simple, structured explanation of the case and why it matters.
1. What Was This Case About?
A large group of freeholders and institutional landlords argued that the 2024 Act unlawfully reduced the financial value of their freehold interests.
Their challenge focused on the Act’s revised approach to calculating premiums when leaseholders:
- extend their leases, or
- purchase the freehold.
They claimed these reforms interfered with their property rights under A1P1. Article 1 of Protocol 1 (A1P1) is a part of the European Convention on Human Rights that protects a person’s property rights.
It means the Government cannot interfere with someone’s possessions unless:
- the interference is lawful,
- it pursues a legitimate public interest, and
- it strikes a fair balance between the public and the individual.
2. Who Brought the Challenge?
The claimants included:
- National property investment funds
- Major London estates
- Charitable freeholders
- Landlords owning large portfolios of long leases
Together, they argued the new valuation rules would significantly reduce the economic returns on their assets.
3. How Did the Government Respond?
The claim was resisted by the Secretary of State for Housing, Communities and Local Government, who argued that:
- Parliament is entitled to redesign the leasehold system
- The reforms pursue a legitimate public interest
- A1P1 does not guarantee any landlord a fixed financial outcome
- The Act aims to make enfranchisement more transparent, consistent and accessible
4. What Did the Court Decide?
In a judgment by Lord Justice Holgate and Mr Justice Foxton, the Court held:
- The 2024 reforms do interfere with freeholders’ economic interests
- But the interference is lawful, proportionate and justified
- Parliament has a wide discretion in shaping housing and economic policy
- A1P1 protects property rights, but does not freeze any particular valuation model
- Charitable landlords are not entitled to special exemptions
All grounds of challenge were dismissed.
5. Why A1P1 Was Not Breached
The Court took the view that the reforms:
- Serve a legitimate aim of modernising and simplifying enfranchisement
- Rebalance long-standing inequalities between freeholders and leaseholders
- Maintain a reasonable relationship between public interest and individual rights
- Do not amount to arbitrary or excessive interference
The judges accepted that freeholders may face financial impact but held that this alone does not establish a breach of A1P1.
6. Why This Judgment Matters
This is a significant ruling for anyone involved in residential long-leasehold property.
The Court’s decision:
- Confirms the legal foundation of the 2024 reforms
- Provides clarity and certainty for ongoing and future claims
- Ensures the new valuation rules can continue to be implemented
- Signals a stronger, leaseholder-focused direction in policy
- Requires freeholders and investors to adjust to a revised valuation environment
7. What This Means for Leaseholders & Freeholders
For Leaseholders
- Enfranchisement is expected to be more affordable
- Valuation rules are now more predictable
- Claims can proceed with greater confidence
For Freeholders
- Premiums may be lower under the revised model
- Financial expectations must be reassessed
- Legal uncertainty around the reforms is now largely resolved