The Leasehold system has been undergoing reform over the past few years. In 2024, the Leasehold and Freehold Reform Act 2024 (“the Act”) received Royal Assent. However, a group of institutional freeholders bought a claim challenging the Act. They claimed that the proposed changes were unlawful as they breached property rights under the European Convention on Human Rights. The proposed changes under the Act include the removal of marriage value, caps on ground rent contributions and a limit on legal costs that can be recovered from freeholders. There were six central issues raised.
On 24 October 2025, the High Court dismissed all six challenges raised against the Act. The arguments were rejected, and it was held that the reforms were lawful. The court held that there were legitimate aims and within the public interest to attend to leases which are deemed a “wasting asset”.
This decision allows Government to proceed with the Leasehold Reform, and it is deemed as a victory for leaseholders. Leaseholders can expect:
- Certainty: Now the claim has been dismissed, the Government is able to proceed without delay hopefully providing clarity and costs for the procedures.
- Easier and cheaper lease extensions: From January 2025, leaseholders no longer need two-years of ownership to extend their lease. The abolition of marriage value should reduce premiums payable for leases which have a term under 80 years. Freeholders can no longer recover non-litigation costs therefore legal expenses are likely to be payable by them.
- Longer Lease terms: Under the Act, statutory lease extensions will be for 990 years at a peppercorn ground rent.
However, this decision creates a more challenging position for freeholders. Removing marriage value is significant as it will reduce profitability for many freeholders. The Act may also require clearer accounting and fairer apportionment costs in relation to service charge and cost recovery. It will be a period of adjustment.
Whilst it is deemed a success for leaseholders, there is no indication as to when the changes will come into effect. There is likely to still be a period of waiting before the changes are implemented whilst the Government confirm the final approaches.
If you wish to discuss any of the above, please contact our Dispute Resolution Team below or call us on 01702 338338.
