Leasehold reform after the judicial review – what’s next for LAFRA 2024?

After what seemed like a long wait over the summer for leasehold reform professionals and leaseholders, on 24 October 2025 the High Court rejected six linked judicial review claims following the enactment of the Leasehold and Freehold Reform Act 2024 (LAFRA 2024).

How did we get to this point?

In the final days of the Conservative government in May 2024 LAFRA was “washed through” parliament to the surprise of leaseholders and professionals in the sector. In June 2024, the legislation was published.

On paper, it looked as though leaseholders would be better off. They would find it easier to extend their lease and would no longer need to pay Marriage Value to landlords on lease extensions. Leaseholders also no longer needed to pay some of the landlord’s costs during claims, among other benefits. There was also a ban on the sale of any new leasehold houses.

However, the legislation created more uncertainty than it resolved, as certain elements were still up in the air including deferment and capitalisation rates used to calculate lease extension premiums. More importantly, there was also further uncertainty as to when the Act would come into force due to the requirement of secondary legislation.

This left many leaseholders in a period of uncertainty until 31 January 2025, when the Government abolished the two-year rule to commence lease extension claims under LAFRA 2024 being the first step in implementing legislation. Further sections of the Act were enforced over time relating to Right to Manage claims and remediating Building Safety Act matters.

Why is the Judicial Review important?

Amidst the uncertainty, several major freeholders, including Cadogan Estate and Grosvenor Group, were granted permission by the High Court to challenge LAFRA in January 2025. These freeholders own approximately 390,000 leaseholds collectively and sought to argue that abolition of Marriage Value, a cap on ground rents and removal of lease extension costs contravened their property rights under the Human Rights Act 1998.

The freeholders affected highlighted losses of between £289 million and £404 million over time. The important point to note is that this only concerns a small group of freeholders against the Government’s estimated total losses of £1.9 billion by 2035 following introduction of the Act.

With so much at stake for freeholders, they chose to challenge the legislation with leaseholder groups not allowed to intervene to prevent the challenge at the High Court.

In July 2025, a four-day hearing took place in the High Court where the matter was challenged and what followed was an anxious wait for all… until 24 October 2025 when the decision was published.

What was the outcome?

Whilst we won’t go into the detail of the circa 170-page judgment, the claims were dismissed on the basis that they were not incompatible with Human Rights legislation and found that the Government’s approach was lawful and proportionate.

Law Commission Consultation had already taken place in 2018 long before the matter brought before parliament with the Human Rights issue being raised early on, so it was of some surprise that the matter was challenged.

What happens next?

There remains some crystal ball gazing on this front, as no formal response has been issued by the freeholders following the judgement. There is a possibility that the decision will be appealed. There then rests whether the matter will be heard in the Court of Appeal or go straight to the Supreme Court as a “leapfrog appeal.” This matter may even end up in Strasbourg at the European Court of Human Rights - at great time and cost to all involved.

Whilst an appeal and further challenges cannot guarantee a different result, it will further delay implementation of LAFRA 2024 by some time (the last delay was some 18 months following it being enacted). If the matter were to end up in the European Court, due to the time takes for a hearing and judgement, a new Government could well be in place (if it  reaches this point) which may take a different stance on the legislation and scrap it altogether.

From the Government’s point of view, the proposed consultations on capitalisation and deferment rates may take place in the coming months as planned now a decision on the Judicial Review has been issued, but may also be further delayed.

Adam Smylie, Head of Professional Services at Kirkby Diamond comments:

“The chances of the Judicial Review going in the freeholders’ favour were likely to be slim, but with so much at stake it is unsurprising that LAFRA 2024 was challenged. From a personal perspective as a practitioner in the sector, the delay has had a negative effect on many leaseholders I have dealt with who in their own words, “cannot wait any longer for change to happen”.

The legislation is wide ranging and attempts to take a hammer blow to the status quo of leasehold instead of introducing smaller simpler legislation aimed at dealing with say 990 year extensions, service charge matters and minor variations to the valuation mechanisms.

If capitalisation rates and deferment rates were known, perhaps the freeholders may not have taken the Government to Judicial Review. Whilst proposals are aimed to make lease extensions cheaper with capitalisation rates generally at 6-8% and deferment rates generally at 5%, dropping these to circa 3-3.5% as suggested, hypothetically would cause lease extensions to become more expensive on leases over 80 years without onerous ground rents.

With the judgement having been handed down before the Autumn Budget in November 2025 and financial black holes needing to be filled, the impact this legislation will have on pension funds who own residential ground rents seems to have been put to the one side or forgotten about which in my opinion is wrong, as the ramifications could be widespread outside of the leasehold sector.

While the Government has cleared one major hurdle, the practical implementation of LAFRA 2024 remains uncertain, and further challenges are likely before it takes full effect. I for one will be keeping abreast of the situation as I have been since 2018."

Kirkby Diamond is an ALEP Member and has an active residential leasehold advisory team.

For more information on Leasehold Extension and Enfranchisement queries please contact Adam Smylie 01582 738866 or email valuations@kirkbydiamond.co.uk.