Article 1 of Protocol 1 Challenge to Leasehold Reform Rejected - for Now

The Leasehold and Freehold Reform Act 2024 (LAFRA) received Royal Assent on 24^th  May 2024, with the aim of “improving consumer choice and fairness in leasehold.” It represents one of the most significant overhauls of the leasehold system in a generation.

However, the reforms faced immediate resistance. A coalition of major freeholders (the “Coalition”) launched a judicial review challenging key provision of the Act. The group includes high-profile landowners such as Duke of Westminster’s Catagan Group, along with two charities (The Cadogan Estate, The Grosvenor Estate, Long Harbour, Albanwise Wallace, John Lyon’s Charity, and The Portal Trust), who collectively control or manage approximately 390,000 leasehold interests.

The Challenge

The main premise of their argument was regarding the valuation reforms.  The Coalition argued that the reforms would infringe upon their rights under Article 1 of Protocol 1 of the European Convention of Human Rights (A1, P1 ECHR), which protects peaceful enjoyment of possessions, and that they are deprived of a fair return on their assets, with LAFRA failing to provide adequate compensation for the loss of their income.  In summary, their challenge at the High Court concerned the following provisions:

1. Abolition of marriage value
2. Cap on ground rent at 0.1% of the freehold value (for valuation purposes)
3. Removal of freeholders’ rights to recover reasonable legal and valuation costs in enfranchisement claims

The claimants maintained that these reforms were disproportionate, could lead to hundreds of millions of pounds in losses, and failed to strike a fair balance between private property rights and the public interest.

Marriage Value

One of the most highly contested provisions challenged by the claimants is regarding marriage value, arguing that it is a property right protected by Article 1, Protocol 1 of the ECHR and that abolishing marriage value would represent an unlawful deprivation of property. Marriage value occurs when the interests of the leasehold and the freehold are combined through lease extensions. This increases the value of the property as the combination of interests is worth more than the sum of the parts. Marriage value is regarded as a major income source for short leases, reflecting the additional market value of a lease following the completion of a lease extension.

Ground Rent Cap

The claimants argued that the ground rent cap unfairly strips them of the true economic value of their assets, with Monica Carrs-Frisk KC arguing that the 0.1% ground rent cap lacks social justification. 

Recovering Costs

Finally, the claimants challenge that the new costs regime prevents them from recovering legitimate expenses, again interfering with their property rights under A1, P1 ECHR.   

The Judgment

In October 2025, the High Court dismissed the challenge. The Court accepted that the reforms interfered with property rights but found there was “robust justification” for each measure and that a “fair and proportionate balance has been struck.”

The Judgement rejected the proportionality challenge to the Marriage Value Reform and the Costs Recovery Reform stating that “there is a robust justification for the Reforms which is logically connected to the aims of the legislation, in particular remedying the wasting asset problem and unfairness and imbalance in the relationship between all landlords and tenants falling within the enfranchisement code. There are no less intrusive measures for meeting the aims of the legislation which ought to have been adopted. The Reforms do not result in an excessive burden being placed on landlords. A landlord will receive compensation which is reasonably related to the market value of the interest of which he is deprived. A fair and proportionate balance has been struck”.

The Court concluded that they were satisfied that the ground rent cap in LAFRA represents a fair balance between the LAFRA objectives and the impact on landlords (specifically on each of the claimants) stating that “capping the ground rent at a level which excludes onerous ground rents from the calculation of the enfranchisement premium, but which allows ground rents up to a percentage of the market value at the date of valuation, will not result in a landlord receiving compensation which is not reasonably related to the market value of the interest of which he is deprived and which represents a proportionate means of pursuing the legitimate objects of the LFRA 2024”

In regards to public interest and private rights, the judgement argued that measures designed to ensure a more equitable distribution of economic benefits and/or burdens within a particular form of legal relationship, may justify a deprivation of private property in the public interest in accordance with A1P1, whilst referring to James v United Kingdom “[a] taking of a property affected in pursuance of legitimate social, economic or other policies, may be ‘in the public interest’ even if the community at large has no direct use or enjoyment of the property taken” ([44]-[45]).

Ultimately, the Court concluded that the LAFRA reforms on marriage value, ground rent, and costs recovery individually and cumulatively were deemed compatible with A1, P1 ECHR.

What Happens Next

While this ruling represents a major win for leaseholders, the story may not be over. The Coalition could still seek permission to appeal, leading to further delays- which are notorious in the world of leasehold reform. An appeal would prolong final resolution with the potential that the case will reach the ECHR. This gives rise to concern that the reforms could be delayed, potentially for years.

Additionally, the legislation require extensive secondary legislation and time to enact, by the Governments own admission, the legislation itself has been described as having “a small number of specific but serious flaws which would prevent certain provisions from operating as intended and that need to be rectified via primary legislation”,  likely giving rise to further delays regardless. The true impact remains uncertain and will not be felt for months, if not years to come.

As a result, although leaseholders have reason for optimism, the true impact of LAFRA may not be felt for months or even years to come. The key question remains whether these long-promised reforms will finally deliver real change, or simply add to the growing list of leasehold promises yet to be fulfilled.

Read the full judgment here.