[2025] EWHC 2751 (Admin)

The Valuation Report of January 2020 noted at [1.23] that some landlords had suggested in the course of the consultation process that “reducing premiums would reduce the income of some charities and reduce the value of some pension funds”, with the report expanding on the concerns expressed at [3.171]. At [3.191], the report noted that, from the tenant’s perspective, it did not matter who their landlord was because the systemic problems of leasehold ownership were present regardless. At [5.60], the report recorded evidence from John Lyon’s Charity as to the impact of the proposed reforms on them. The Enfranchisement Report returned to this issue. At [6.377], it recorded the submission of John Lyon’s Charity as to the effect the reforms would have on its charitable giving.

At [7.277]-[7.278], the Law Commission recommended against any exemption from enfranchisement on this basis, because “like all landlords, charities generally grant long leases as a way of making money from their property assets” and “we do not see why the purpose or purposes for which that money will be used should have any bearing on whether enfranchisement rights are available to the leaseholder.” That conclusion was endorsed in [2.40] of the DLUHC response of 27 November 2023 to the DLUHC consultation of January 2022 and reflected in advice to the Housing Minister of 6 November 2023, in which it was also stated that the rights of tenants should not depend on the identity of their landlord, and “there would be undesirable outcomes if more landlords seek to become charities to avoid requirements.”

John Lyon’s Charity raised the same arguments in correspondence and at meetings with Government representatives in the period following the Enfranchisement Report, including through the Rt Reverend David Walker, Bishop of Manchester. The Government’s position did not change.

The IA of 31 October 2023 placed before Parliament provided at [134]:

“While it is difficult to generalise about freeholders (who will hold different portfolios of short and long lease properties, and with different ground rents), large freeholders, charities who own freeholds, and pension funds are very unlikely to rely solely on income from enfranchisement. Freeholders often have diversified business interests, which mitigates the financial impact and reduces the likelihood of insolvency. We think that freeholders who hold a significant number of freehold titles are likely to pursue one of two main investment strategies: there will be those who hold a portfolio comprised of modern developments who generate an income through ground rents and there will be those who hold the freeholds of older properties who look to generate an income from enfranchisement. For freeholders of older properties, there is a higher likelihood of leases 80 years or under and therefore payment of marriage value. For portfolios of modern leases, we know that there is a higher prevalence of leases with high or escalating ground rents. For these properties, while enfranchisement may be less common currently, there is an expectation that when it arises a significant proportion of the premium will relate to the level of ground rents. These investments are therefore significantly affected by the 0.1% on ground rent in the valuation calculation.”

The ECHR Memorandum referred to [27]-[29] to certain exemptions granted for particular charities:

“Paragraphs 4 and 5 of Schedule 1 provide for an exemption from collective enfranchisement claims for community-led housing (CLH). The exemption will apply to a CLH organisation which has obtained a declaration from the Tribunal to that effect that it satisfies or will satisfy the definition of community-led housing.

A1P1 is engaged by this measure in the sense that unless the application process for an exemption is applied for these types of houses will not be exempt from the wider reforms. The measure is proportionate as the exemption is a means of providing an affordable supply of housing to members of a community for the long-term benefit of that community as affected properties will remain in community ownership, which is a legitimate policy aim.

For certain, specified leases of inalienable National Trust land, for example, leases of visitor attraction properties, the National Trust will enjoy a complete exemption from all enfranchisement claims under the new regime in the Bill, though on the basis that where any such leases would benefit from the lease extension right under the LRA 1967 Act, that right will remain available.

All other leases of inalienable land will be excluded from freehold acquisition rights, but will benefit from the same 990-year lease extension right as all other long leaseholders.

Where a leaseholder of inalienable National Trust land has extended their lease under the new regime in the Bill, the lease will thereafter be subject to a right of first refusal in favour of the National Trust. The National Trust will be entitled to “buy back” the lease whenever the leaseholder seeks to dispose of it.

A1P1 is engaged by this measure though Government considers it to be compliant. The proposals have been consulted on and designed in conjunction with National Trust leaseholders and the National Trust, with a balance being struck between the interests of leaseholders having the same lease extension rights as ordinary leaseholders, with that of the National Trust in holding the property for the benefit of the public in perpetuity. Freehold acquisition rights continue to be excluded and where a lease is extended, the right of first refusal will enable the National Trust to take back the property if the leaseholder wishes to sell. The new valuation methodology will apply to provide compensation to the National Trust for lease extensions at market value. Paragraphs 7 and 8 of Schedule 1 provide for the following new regime of enfranchisement rights for National Trust owned properties, in place of the current limited rights available to leaseholders.”

Before the publication of the Bill in November 2023, there was extensive consultation between charities concerned about the effect of the proposed reforms on their investment returns, and the Government, including John Lyon’s Charity, both through correspondence and at meetings. The Government continued to correspond and meet with John Lyon’s Charity during the passage of the Bill. The Portal Trust responded to the Law Commission’s consultation and wrote to the then Secretary of State setting out its concerns on 8 April 2022. As would be expected, in those interactions essentially the same points were made in favour of differential treatment as are relied upon now.

So far as the position in Parliament is concerned:

We do not consider that any assistance is to be gained from the fact that the submission to the Housing Minister and Secretary of State on 6 November 2023 contemplated the possibility that concessions might be made on a range of issues not limited to the position of charities, should this be necessary for political reasons. Officials advised that the Government should maintain its approach, Ministers agreed with that advice and that was the course that was taken. It is entirely a matter for speculation as to what concessions might have been discussed in relation to which issues and what the outcome might have been.