The Leasehold and Freehold Reform Act 2024 (LFRA 2024) was introduced with the promise of transforming leasehold ownership in England and Wales. For decades, the system had been criticised for complexity, imbalance, and cost. By removing marriage value, capping the treatment of ground rent, and reducing cost burdens, Parliament sought to make lease extensions and enfranchisement more affordable and accessible.
Yet, only a year later, the Act's most consequential reforms face a formidable challenge in the High Court. In July 2025, six major freeholders and charitable estates launched a judicial review. The outcome will determine whether the central pillars of leasehold reform survive intact or are curtailed at the very moment they were due to take effect.
Why Leasehold Reform Was Needed
Leasehold has long been controversial. Leaseholders own their homes for a term of years but remain bound to pay ground rent and service charges, and must navigate complex rules if they wish to extend their lease or buy the freehold. Critics argued the system disproportionately favoured landlords, particularly in high-value urban areas where premiums could be very high.
One of the most disputed elements was marriage value- an additional sum payable once a lease drops below 80 years, reflecting the "marriage" between freehold and leasehold value. Leaseholders argued this was an unfair windfall for landlords. Freeholders, conversely, saw it as the recognition of a genuine financial interest.
Calls for reform grew louder after the Grenfell tragedy exposed weaknesses in leaseholders' protections and wider public awareness of escalating service charges. Parliamentary committees repeatedly urged wholesale reform, culminating in the 2024 Act.
Key Provisions of the Leasehold and Freehold Reform Act 2024
The Act set out to address three structural issues: valuation, term length, and costs.
1. Valuation
- Abolition of marriage value;
- Ground rent to be treated on a capped basis (0.1% of freehold vacant possession value) when calculating premiums;
- New prescribed rates to be set by secondary legislation, intended to make valuations more predictable and cheaper for leaseholders.
2. Lease Term
- Extension rights for flats and houses lengthened to 990 years.
3. Costs
- General rule that each side bears their own non-litigation costs in enfranchisement and lease extension claims, with very limited exceptions;
- Changes to Right to Manage to curb the recovery of landlords' costs from leaseholders.
4. Other Reforms
- Simplification of Right to Manage eligibility;
- Provisions around transparency of estate management charges;
- Removal of the two-year ownership requirement for exercising statutory rights.
Some measures, such as the removal of the two-year ownership rule (in force since January 2025), have already taken effect. Others, including the 990-year term and new valuation rates, await secondary legislation.
The Judicial Review
In July 2025, the Divisional Court (Holgate LJ and Foxton J) heard a four-day judicial review brought by six claimants, The Cadogan Estate, The Grosvenor Estate, Long Harbour, Albanwise Wallace, John Lyon's Charity, and The Portal Trust. Together they control or manage around 390,000 leasehold interests. Their challenge is targeted squarely at the valuation reforms.
The Freeholders' Arguments
The claimants argue that:
- Marriage value is a property right protected by Article 1, Protocol 1 of the European Convention on Human Rights. Abolishing it represents an unlawful deprivation of property.
- The ground rent cap unfairly strips them of the true economic value of their assets.
- The new costs regime prevents them from recovering legitimate expenses, again interfering with property rights.
- Overall, the reforms are disproportionate, causing losses measured in hundreds of millions of pounds, while failing to strike a fair balance between public interest and private rights.
The Government's Defence
The Secretary of State defends the reforms as a legitimate social policy measure designed to redress decades of imbalance. Parliament, it argues, is entitled to legislate for affordability and fairness in the housing market. The government also maintains that marriage value is not itself a "possession" for ECHR purposes but rather a statutory construct capable of reform.
What Happened at the Hearing?
Reports from court suggest the judges showed scepticism towards the idea of marriage value as a property right. They also questioned whether the financial losses claimed by freeholders, while significant, outweighed the public interest in reform. Judgment has been reserved, with a decision expected later in 2025.
Notably, applications by leaseholder campaign groups to intervene were refused earlier in the year. Critics argue this has left leaseholders, the very people intended to benefit, without a direct voice in proceedings.
Reform Delayed
Some elements of LAFRA have already come into force. Leaseholders no longer need to wait two years before seeking a lease extension, and eligibility for the Right to Manage has been widened.
However, other landmark reforms remain paused. The planned 990-year lease extensions and further controls on estate management charges depend on secondary legislation. These measures are now delayed while the judicial review proceeds.
For many leaseholders the uncertainty is acute. A recent Opinium survey, reported by The Times in July 2025, found that almost 60% of leaseholders were struggling to sell their homes, while around three-quarters had seen their service charges rise over the past year. The lack of clarity over reform has left households facing financial and practical strain.
What Happens Next?
The reserved judgment will determine whether LFRA 2024's most significant provisions survive intact. Three broad outcomes are possible:
1. Reforms upheld in full
- Leaseholders gain cheaper and longer lease extensions, with reduced costs.
- Freeholders lose marriage value and face lower ground rent treatment.
2. Partial success for freeholders
- Court may uphold some challenges (e.g. on costs recovery) whilst allowing others to stand.
3. Challenge succeeds in full
- Parliament may need to revisit the legislation, delaying reform further and leaving leaseholders in continued uncertainty.
Practical Implications in 2025
- For freeholders: Uncertainty around asset valuation continues. Enfranchisement portfolios may be repriced depending on the outcome.
- For leaseholders: Negotiations and sales remain difficult, with buyers cautious until clarity emerges.
- For lenders: Mortgage providers are watching closely, as the availability of finance for short leases hinges on predictable valuation.
- For the housing market: Delay in reform undermines confidence, with a knock-on effect on mobility and affordability.
Conclusion
The judicial review of the Leasehold and Freehold Reform Act 2024 is a pivotal moment for property law. For the government, it is a test of whether Parliament can deliver a long-promised overhaul of leasehold on grounds of fairness. For freeholders, it is a fight to protect billions of pounds in asset value. For leaseholders, it is the difference between being able to extend or enfranchise on fair terms, or remaining locked ion a system long criticised as outdated and unbalanced.
As the sector awaits judgment later this year, both landlords and tenants must prepare for an uncertain few months. The only certainty is that the outcome will reshape the future of leasehold for decades to come.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
