Leasehold reforms ‘breach human rights', freeholders tell High Court

Telegraph

17-07-2025

Freeholders have launched a legal challenge against the Government over claims that leasehold reforms breach human rights law and will leave them millions of pounds worse off.
Landowners – including two charities who own the freeholds of thousands of flats – on Tuesday told the High Court that plans to abolish 'marriage value' and ground rents could cost them millions of pounds.
The six claimants said the measures contravened freeholders' rights to enjoy private property, as enshrined in the European Convention of Human Rights (ECHR).
The Leasehold and Freehold Reform Act (LAFRA) reforms were introduced under the previous Conservative government and passed into law last year.
The legislation made it cheaper and easier for homeowners in England and Wales to extend their leases or buy freeholds, banned new leaseholds and effectively abolished ground rent for new leases.
The reforms also introduced a ban on marriage value to make it cheaper for leaseholders to extend short leases. Marriage value is the increase in a property's worth when a leaseholder buys the freehold or extends its lease once there are fewer than 80 years left on it.
Under previous rules, leaseholders would pay half of the increase in the value of their property to the freeholder at the point of extending the lease.
But the landowners argued that the measures could cost them hundreds of millions of pounds, and that they were not receiving adequate compensation for the shortfall.
Among the claimants, which included property firms Cadogan Group and Grosvenor Group, was John Lyons, a youth charity. The company said it relied on revenue from its leasehold properties, and that the reforms had put the charity's future under threat.
The London-based charity said: '[This case] is really critical to our asset base and our grant-giving. We're the largest funder of children's and young people's charities in London – this means that 10pc of our grant-making (£1.4m) will have to be cut back if this legislation goes through, and we're not exempted.
' We're not a typical freeholder – we don't make profits. All freeholders are being lumped together, as if we all have the same characteristics – we don't.'`
Leaseholders, who can face uncapped service charges and the threat of removal from their property if they do not pay ground rent alongside expensive lease renewal costs, have been desperate for major reform for decades.
But campaigners now fear that the hearing could significantly delay further changes promised by the Government as part of its election-winning manifesto.
As well as a ban on new leasehold flats and marriage value, the Government said it would strengthen leaseholders' rights to buy their freehold, make commonhold the default tenure for homeownership, cap ground rents and remove the threat of forfeiture – which can see leaseholders removed from a property if they do not pay ground rent.
There are currently around 4.8 million leaseholders in England, the majority of whom are flat owners.
Harry Scoffin, founder of campaign group Free Leaseholders, said: 'It's outrageous. They bang on about human rights, but these guys are big corporations, trying to prop up a system destroying leaseholders' human rights.
'It's an affront to democracy – an elected Conservative government got this through with cross-party consensus. They are also trying to get the Government to back down on their manifesto commitment to end the leasehold system.
'This is about letting people own their homes outright, and not be at the behest of a landlord – no other country practices leasehold.'
Mr Scoffin – along with other leasehold campaigners – said the case could end up in the European Court of Human Rights in Strasbourg, which could mean years of delays before a verdict.
'People who are struggling to pay their service charges are not going to be happy if they hear about leasehold reform delays,' he added.
'Labour will struggle to keep promises'
Significantly reforming or abolishing leasehold was always going to be an enormously challenging endeavour due to age-old legislation, issues that lenders have with commonhold – the proposed alternative homeownership model to leasehold – and a lack of guidance and clarity.
Experts have warned that the Government may have bitten off more than it can chew, and will struggle to keep its promises to millions of leaseholders.
Samuel Hughes, of think tank Centre for Policy Studies, said: 'It is lawful for the state to expropriate private property sometimes in the public interest, such as when it uses compulsory purchase to build a railway.
'Normally, however, property owners receive compensation equivalent to at least the market value of the property that has been seized.
'The unusual thing about this Act is that it forces freeholders to sell assets for less than their market value, meaning that they might receive less compensation when their assets are expropriated than they paid themselves when they originally bought the assets consensually.
'It is hardly surprising that they see this as violating their private property rights. The Court's decision will have significant implications for how we understand the rights of the British people against expropriation in the years to come.'
Reema Chugh, a partner at law firm Hodge Jones and Allen, previously told The Telegraph: 'Retrospectively removing contractual rights is likely to be very challenging. The mechanisms to do it are really unclear.
'Ground rents are also often tied up in investment products [such as pensions]. If they retrospectively remove it, compensation schemes could be required, at a huge cost to taxpayers.'
On Monday, Angela Rayner, the deputy prime minister, told MPs: 'This week, the High Court will be hearing challenges to some of the [2024] Act enfranchisement reforms, and we'll be robustly defending those challenges, and we'll await the court's judgment.'
Grosvenor Group and Cadogan Group declined to comment.