Leasehold reforms at risk after landowners’ appeal victory
Labour’s proposed leasehold reforms have encountered a significant obstacle after landowners were granted permission to appeal key elements of the legislation. You may have seen this write up in the Telegraph. The decision introduces fresh uncertainty into what has been presented as a central plank of the Government’s housing agenda, write Clive Scrivener MRICS and Zah Azeem MRICS, Partners at Wimbledon based Chartered Surveyors Scrivener Tibbatts.
Ministers have been advancing an ambitious programme of reform, including the proposed abolition of the leasehold system and the introduction of a universal £250 cap on ground rents. These measures depend heavily on implementation of the Leasehold and Freehold Reform Act (LAFRA), intended to make it cheaper and simpler for homeowners to extend leases or acquire their freeholds.
A consortium of freeholders challenged the legislation last year, arguing that aspects of the reforms infringed property rights protected under the European Convention on Human Rights (ECHR). While the High Court dismissed the initial challenge, the Court of Appeal has now granted permission for the case to be heard on all grounds.
The ruling is seen as a positive development for major landowners and opens the door to further legal scrutiny of the Government’s broader housing reforms. Inevitably, it prolongs uncertainty around the timetable for implementation of LAFRA and associated measures, including the proposed ground rent cap and the longer-term move away from leasehold tenure.
Observers have warned that the residential property market may remain in a state of limbo while the appeal proceeds through the courts – a process that could take many months.
Housing reform has been positioned as a core policy priority for Sir Keir Starmer’s government. Although LAFRA received Royal Assent in May 2024 under the previous Conservative administration, many of its provisions have yet to come into force, with legal challenges contributing to delays in implementation.
Freeholders initiated proceedings last summer, contending that the reforms could significantly diminish the value of their interests and amount in effect to a form of compulsory purchase without appropriate compensation. The Government has previously estimated the overall impact on landlords at approximately £4bn.
Looking further ahead, ministers intend to move towards a commonhold system by 2028, under which flat owners would own their properties outright and collectively manage their buildings, removing the role of traditional landlords. The proposed £250 cap on ground rents had also been anticipated to come into effect around that time, subject to parliamentary scheduling.
Quoted by the Telegraph, James Carpenter, of law firm Forsters, highlighted the broader implications of the appeal: “Ground rent investors are expected to scrutinise the outcome of the LAFRA appeal closely. If the landlords succeed in overturning LAFRA, the legality of the proposed ground rent cap will also be in serious doubt.
“The Government’s housing policy resembles a house of cards, with LAFRA at its base. If the Court of Appeal ultimately pulls that card out, much of the wider legislative programme risks collapsing with it.
“The stakes are high, and both leaseholders and landlords will be watching the appeal with bated breath, aware that its outcome could determine the future direction of housing reform.”
A spokesperson for the Ministry of Housing, Communities and Local Government said: “We intend to robustly defend this appeal.
“We remain committed to giving leaseholders greater rights, powers and protections over their homes and bringing the feudal leasehold system to an end.”
As the legal process unfolds, stakeholders across the sector – leaseholders, freeholders, investors and policymakers – will be monitoring developments closely. The appeal’s outcome may prove pivotal in determining not only the future of LAFRA but also the wider trajectory of leasehold reform in England and Wales.
If you would like to discuss something related to a property valuation specifically a Lease Extension, Freehold Valuations and Market Valuations for disputes, please contact Clive or Zah direct via email at clive@scrivenertibbatts.co.uk and zah@scrivenertibbatts.co.uk or call 020 8947 7040.
