According to a recent BBC report, a group of landowners have initiated a judicial review in the High Court, raising a claim against the previous government's attempts to reform the freehold and leasehold system of property ownership in England and Wales.

Specifically, they are seeking to challenge some of the provisions of the Leasehold and Freehold Reform Act 2024 (the Act).  These landowners, whose assets include ground rent portfolios and the freehold interests to residential leasehold dwellings, argue that the Act will adversely affect their investments. 

This is because the disputed provisions of the Act aim to make it cheaper and easier for leasehold owners of residential dwellings to enfranchise (collectively acquire the freehold to their property) or extend the term of their lease.

The provisions in question set out how the calculation of the value of the property is ascertained for calculating the compensation due to landlords under enfranchisement claims.  Key changes introduced by the Act include removing marriage value (the additional value created when a leaseholder extends their lease or acquires the freehold), capping ground rents at 0.1% of the value of the freehold, and limiting certain costs that landlords can pass on to leaseholders. 

But making it cheaper for leaseholders will simply shift the financial burden onto their landlords and freehold owners.  Abolishing marriage value alone, for example, is projected to result in a loss of £1.9bn to landlords and freehold owners, so it is no surprise that these landowners will resist any measures that threaten to reduce such income streams. 

They argue therefore that any interference with how such compensation figures are calculated, and the resulting loss of income, will contravene their right to the peaceful enjoyment of their private property under the European Convention on Human Rights. 

The judicial review will assess the merits of this claim, but the issue highlights some of the difficulties that the Government will face in achieving meaningful leasehold reform amidst conflicting stakeholder interests. 

The Labour government intend to introduce further sweeping reforms and have pledged to abolish the residential leasehold system entirely and replace it with commonhold.  The proposed reforms are substantial, and may well encounter similar stumbling blocks as described above.

We’ll continue to monitor these developments closely, so follow us for further updates and insights on this ever evolving area of law