Marriage Value Isn’t Dead Yet: What Has Happened Since the ARC Time Judgment?

When I last wrote about Marriage Value Abolished: High Court Upholds Leasehold Reform Act, the High Court had just delivered a significant judgment in R (ARC Time Freehold Income Authorised Fund & Others) v Secretary of State for Housing, Communities and Local Government [2025] EWHC 2751 (Admin).

For leaseholders, the judgment looked like a major victory.

A group of freeholders had challenged some of the most important provisions of the Leasehold and Freehold Reform Act 2024, including the proposed abolition of marriage value and the new treatment of ground rent when calculating the price of a statutory lease extension or freehold purchase.

The challenge failed. So, nearly a year later, where are we?

The slightly frustrating answer is: quite a lot has happened, but marriage value has not disappeared just yet.

And there is now another trip to court on the horizon.

A quick reminder: what was ARC Time about?

The Leasehold and Freehold Reform Act 2024 promised some of the most substantial changes to leasehold enfranchisement for decades.

Amongst other things, the new regime is intended to:

• give qualifying leaseholders a statutory lease extension of 990 years at a peppercorn ground rent;
• abolish marriage value from the statutory valuation calculation;
• cap the ground rent taken into account for valuation purposes at 0.1% of the property's freehold vacant possession value;
• introduce prescribed valuation rates rather than leaving some of the most important assumptions to negotiation between valuers; and
• change the rules relating to the costs of the enfranchisement process.

For many leaseholders, particularly those whose leases have fallen below 80 years, the abolition of marriage value could be extremely significant.

That is because, under the existing legislation, once a lease falls below 80 years the landlord is generally entitled to 50% of the "marriage value" created by combining the leaseholder's and landlord's interests.

In our previous article I looked at how that calculation works and why, for a leaseholder with a relatively short lease, marriage value can add a substantial amount to the premium.

Unsurprisingly, therefore, the 2024 reforms have consequences on both sides of the equation. What represents a potentially substantial saving for leaseholders represents a corresponding reduction in the value of freeholders' interests.

That led to ARC Time.

The freeholders lost in the High Court

The claimants argued, amongst other things, that aspects of the reforms amounted to an unjustified interference with their property rights under Article 1 of Protocol 1 to the European Convention on Human Rights (A1P1).

The challenge included the abolition of marriage value, the 0.1% ground-rent valuation cap and the reforms concerning recovery of landlords' costs.

The High Court rejected the challenge.

In relation to marriage value, the Court accepted that Parliament was entitled to address what it regarded as the inherent disadvantages of the leasehold system, including the fact that a lease is ultimately a wasting asset.

Crucially, the Court concluded that removing marriage value did not mean that the compensation received by a landlord ceased to be reasonably related to the market value of the interest being acquired.

That was an important judgment for the Government. But it was not the final word.

Round two: the Court of Appeal

Since my previous article, permission has been granted for the freeholders to appeal.

The appeals have been consolidated and the Court of Appeal will therefore have an opportunity to consider important aspects of the High Court's decision.

That does not mean that the High Court judgment has been overturned. Permission to appeal simply means that the arguments will receive further consideration by the appellate court.

For the moment, therefore, the Government's victory in ARC Time stands.

What is particularly interesting is what the Government has chosen to do in the meantime.

It has not put leasehold reform on ice while everybody waits for the Court of Appeal. Quite the opposite.

The Government is pressing ahead

On 15 July 2026, the Government launched an important consultation dealing with the capitalisation and deferment rates which will form part of the new Standard Valuation Method under the 2024 Act.

If your immediate reaction to the words "capitalisation and deferment rates" is to consider turning the page, bear with me. They matter. A lot.

Abolishing marriage value is only part of the equation when calculating the premium payable for a lease extension.

The landlord is still giving up valuable property rights. The new statutory calculation therefore has to put a present-day value on, amongst other things, the landlord's right to receive ground rent and its right to recover possession of the property at the end of the lease.

That is where these rates come in.

The capitalisation rate is used when calculating the present value of the landlord's future ground-rent income.

The deferment rate is used when calculating the present value today of the landlord's right to vacant possession at some point in the future.

Small movements in those rates can produce very significant differences in valuation.

Historically, these issues have generated expert evidence, negotiations between valuers and, sometimes, litigation. The intention under the new system is for the Government to prescribe the applicable rates.

The objective is obvious: greater certainty, simpler calculations and fewer arguments over valuation assumptions.

The difficult bit is deciding what those rates should actually be. And that is precisely what the current consultation is about.

The consultation, originally due to close in September, has been extended and now closes at 11.59pm on 21 October 2026.

So has marriage value actually been abolished?

This is where an important distinction needs to be made.

Parliament has legislated for its abolition. But the new valuation regime is not yet in force.

That distinction matters enormously.

I occasionally hear people say that marriage value has now been abolished as though a leaseholder with, say, a 65-year lease can walk into a statutory lease extension today and simply remove it from the calculation.

They cannot.

The Government itself acknowledges that parts of the 2024 Act need to be corrected before the new enfranchisement provisions can be commenced. Those corrections require further primary legislation through the forthcoming Commonhold and Leasehold Reform Bill.

Secondary legislation will also be required to provide much of the technical machinery, including the prescribed valuation rates.

So, for the moment, the existing valuation regime continues.

Marriage value may have received its notice to quit, but it has not actually moved out yet.

Should leaseholders extend now,or wait?

This is probably the question clients are most interested in.

Unfortunately, there is no universal answer.

Imagine somebody owns a flat worth £500,000 with only 60 years remaining on the lease.

Under the present system, marriage value could represent a significant part of the premium required for a statutory lease extension.

It is therefore tempting to say: "Wait. Once marriage value disappears, the extension will obviously be cheaper." It may well be. But the calculation is more complicated than that.

We do not yet know the final prescribed capitalisation and deferment rates. We do not know precisely when the new valuation provisions will commence. There remains an appeal before the Court of Appeal. And the circumstances of individual leases including lease length, ground rent provisions and property value can make an enormous difference.

There are also perfectly good reasons why somebody may not want to wait.

A leaseholder may be selling. They may be remortgaging. Their lease may already be relatively short. Or they may simply prefer certainty rather than waiting for legislation whose final commencement date is not yet known.

The sensible approach is therefore not automatically to "extend now" or "wait". It is to look at the numbers.

For some leaseholders, waiting may ultimately produce a substantial saving. For others, the commercial and practical advantages of dealing with the lease now may outweigh the potential benefit of waiting for the new regime.

And there is another ground-rent reform coming. There is one further development worth watching.

In January 2026, the Government published the draft Commonhold and Leasehold Reform Bill.

Among its proposals is a cap on ground rents in existing qualifying residential leases of £250 per year, with the rent ultimately reducing to a peppercorn after 40 years.

This is easily confused with the 0.1% ground-rent cap involved in ARC Time, but the two are different.

The 0.1% cap relates to the amount of ground rent which can be taken into account when calculating an enfranchisement premium.

The proposed £250 cap, by contrast, concerns the amount of ground rent that a landlord would actually be permitted to demand under an existing lease.

That proposal still has to complete the legislative process, but if enacted it would represent another substantial change to the economics of existing residential leases.

Where does all of this leave us?

We are now in a rather unusual position. Parliament has passed legislation which fundamentally changes how lease extensions and collective enfranchisement will be valued.

The High Court has rejected a major legal challenge to those reforms.

The freeholders have been given permission to take their challenge to the Court of Appeal.

Meanwhile, rather than waiting for that appeal to conclude, the Government is continuing with implementation, consulting on the valuation rates and preparing further legislation needed to make the new system work.

So the direction of travel is clear.

The precise destination, and the date on which we arrive, is rather less so.

For leaseholders, particularly those with leases approaching or below 80 years, these developments are potentially extremely valuable. But they also make individual advice more important rather than less.

A decision about whether to extend a lease today should take account of the existing premium, the remaining lease term, any proposed sale or mortgage and the potential effect of the forthcoming reforms.

What it should not be based upon is the assumption that marriage value has already disappeared. It hasn't.

But after the 2024 Act, the High Court's decision in ARC Time and the Government's continued implementation of the reforms, its days may nevertheless be numbered.

The next important chapters will be the Government's decision on the new valuation rates, the progress of the Commonhold and Leasehold Reform Bill and, of course, what the Court of Appeal has to say about ARC Time. This particular leasehold story is not finished yet.

How Clapham & Collinge Can Help?

At Clapham & Collinge, we provide tailored advice based on your individual circumstances, regardless of the length of time remaining on your lease. Whether your lease has fallen below the important 80-year threshold or has many years left to run, our experienced team can guide you through your options and help you make informed decisions about extending your lease.

For expert advice on lease extensions and leasehold reform, get in touch with our team:

Clapham & Collinge LLP Solicitors

01603 693500

enquiries@clapham-collinge.co.uk

With offices across Norfolk, including Norwich, Sheringham and North Walsham, our team is on hand to provide practical, straightforward legal advice tailored to your needs.