Breaking News: Update on leasehold reform

On Friday 24 October 2025 the High Court released its judgment in ARC Time Freehold Income Authorised Fund and Others v Secretary of State for Housing.

The proceedings, which were brought by a group of established landlords, including the London estates of the Earl Cadogan and the Duke of Westminster, as well as charities and an investors, sought to challenge the compatibility of parts of the Leasehold and Freehold Reform Act 2024 (“the 2024 Act”) with the European Convention on Human Rights (“the ECHR”). The landlords argued that parts of the 2024 Act infringed their right to protection of their property under Article 1 of the First Protocol to the ECHR.

This case represents a pivotal moment in the ongoing debate over leasehold reform in England and Wales. The High Court’s judgment addresses the legality of several core components of the 2024 Act, clarifying the current judicial stance on these long-contested issues.

This decision has been long-awaited by both property owners and legal professionals. Its ramifications will shape the market and future legislative action.

What was being challenged?

A challenge was brought to the removal of marriage value from the calculation of premiums in enfranchisement cases, the capping of ground rents at 0.1% in similar circumstances and the limitation on the landlord’s ability to recover their costs in such claims.

The Court found against the landlords and confirmed that the provisions of the 2024 Act should stand.

What next?

However, the matter is not yet resolved. The landlords are expected to appeal, which may prolong the debate for several years, quite possibly culminating in a trip to the European Court of Human Rights. There also remains the possibility that the present or a future Government may ultimately decide to withdraw the proposed changes.

Even if no appeal is brought, which is considered unlikely, there are still issues under the 2024 Act to address.  There needs to be a consultation on the deferment and capitalisation rates used to calculate premiums and secondary legislation needs to be passed before the new valuation methodology is triggered. There is a long way to go.

This latest development has significant implications for both landlords and leaseholders. While the High Court’s decision provides some clarity for now, uncertainty remains as the legal process continues. Stakeholders should stay informed of further updates, as the outcome of any appeal or future legislative changes could dramatically alter the landscape for leasehold reform.

What should leaseholders do?

In the meantime, any claim made now to extend ar lease or acquire the freehold of a house or a building divided in to flats will be subject to the existing 1993 Act valuation methodology, most of the provisions of the 2024 Act, including those relating to enfranchisement, not yet having been brought into force.

Marriage value accordingly remains included in the premium calculation when a lease has 80 years or less remaining. Ground rents are not subject to a cap in these calculations, and leaseholders are required to pay the landlord’s costs during the process.

Some landlords may be open to negotiating marriage value and ground rent capitalisation during this period of uncertainty, given the financial downside should an appeal not be made or succeed, or if the Government sets rates that lead to lower premiums.

Many enfranchisement practitioners are advising leaseholders to consider the potential risks of waiting for the reforms to come into force before extending their lease or claiming the freehold. The implementation date for these reforms is uncertain and could be several years away, during which time the lease term will decrease, and the cost of enfranchising may well increase.

If you have any questions regarding this subject please contact Katherine Simpson or any other member of the Residential Property team.