The High Court has handed down its long-awaited decision in Arc Time Freehold Income Authorised Fund & others v Secretary of State for Housing, Communities & Local Government [2025] EWHC 2751 (Admin), dismissing all challenges brought by leading London estates including Cadogan and Grosvenor against the Leasehold and Freehold Reform Act 2024 (LFRA 2024).
This landmark ruling confirms that the Government’s leasehold reforms are lawful, paving the way for one of the most significant overhauls to the leasehold system in decades.
The Key Changes Confirmed by the Court
The Court’s decision means that the following reforms introduced by the LFRA 2024 will now go ahead in full:
- Marriage value abolished – the extra premium payable on leases below 80 years has been permanently removed.
- Ground rent cap – ground rents will be capped at 0.1% of the property’s freehold value for the purpose of calculating lease extension and enfranchisement premiums.
- Landlords’ cost recovery restricted – freeholders will no longer be able to recover most non-litigation costs, such as valuation and conveyancing fees, from leaseholders.
The Court held that Parliament acted lawfully and within its discretion to reform an area of housing policy long considered unfair and outdated.
What the Judgment Means in Practice
The High Court’s decision provides long-awaited clarity and relief for leaseholders across England and Wales.
For Leaseholders:
- Lower premiums – With marriage value abolished and ground rents capped, lease extensions and collective enfranchisement should now be considerably cheaper.
- Certainty restored – Leaseholders can confidently proceed with extensions under the new regime once the final regulations are in place.
- Longer terms – The Act also introduces the ability to extend leases up to 990 years, ensuring long-term security of tenure.
For Freeholders: - Portfolio reassessment – Freeholders face a significant reduction in income streams and should review portfolio valuations accordingly.
- Budgeting changes – Restrictions on cost recovery will affect future management and transactional budgets.
- Limited grounds for appeal – While an appeal is possible, the Court’s reasoning makes it unlikely that the reforms will be overturned.
What Happens Next
The detailed valuation rules, including the new deferment and capitalisation rates, will be confirmed in secondary legislation expected later this year. Until those rates are published, valuers and solicitors will be working with estimated figures, but the legal framework is now secure.
How Clapham & Collinge Can Help
Our Property and Litigation Teams have extensive experience acting for both leaseholders and freeholders in lease extensions, collective enfranchisement, and related negotiations.
We can provide tailored advice to ensure you understand the new valuation rules, minimise costs, and make informed strategic decisions in light of the High Court’s ruling.
Whether you own a leasehold flat with a term approaching 80 years, or manage a freehold portfolio affected by these reforms, we are here to help.
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