[2025] EWHC 2751 (Admin)

On 20 December 2016, issues concerning the level of ground rents and the cost of enfranchisement (including associated legal costs) were raised during a House of Commons debate initiated by the APPG.

In February 2017, the Government published a White Paper entitled “Fixing our broken housing market” (the “2017 White Paper”). The foreword by the Secretary of State for Communities and Local Government referred to the insufficiency of homes in the UK, and was principally concerned with the construction of new houses. However, it also addressed leaseholds, referring to the Government’s intention “to promote fairness and transparency for the growing number of leaseholders”. It suggested that some purchasers of leaseholds might not understand the long term financial implications of leasehold ownership, including “increasing and onerous payments” and tenants being left in the dark about the on-selling of ground rents. This was said to be “not in consumers’ best interests” ([4.36]), with ground rents with short review periods a particular concern ([4.37]). The 2017 White Paper highlighted the Government’s commitment to “consult on a range of measures to tackle all unfair and unreasonable abuses of leasehold” ([4.37]). Paragraph 4.38 stated:

“We will consider further reforms through the consultation to improve consumer choice and fairness in leasehold, and whether and how to reinvigorate Commonhold. We will also work with the Law Commission to identify opportunities to incorporate additional leasehold reforms as part of their 13th Programme of Law Reform, and will take account of the work of the All-Party Parliamentary Group on Leasehold and Commonhold.”

The concerns expressed about “unfair and unreasonable abuse of leasehold” were much broader than simply leasehold enfranchisement. Furthermore, they do not appear to be limited to owner-occupier tenants, but refer to issues also likely to be faced by those buying a leasehold property for a purpose other than immediate personal occupation.

In June 2017, the APPG published a preliminary report on improving key areas of leasehold and commonhold law. The APPG had concluded that the existing law in the leasehold sector faced “a number of difficulties” and contained “a number of important defects”. The APPG referred to the growing number of leasehold properties where freeholds are sold on, and to the increasing costs of obtaining a landlord’s permission for particular actions required under a lease. The APPG cited data to suggest that the disadvantages of leasehold as against freehold ownership were not fairly reflected in the market price (figure 2). Reforms suggested included banning leaseholds for new build houses, limiting the growth of ground rents during the life of a lease, the replacement of residential forfeiture, and four recommendations on enfranchisement reforms such as moving the costs of enfranchisement to a formulaic model that did not require mediation by the tribunals, removing the two-year ownership requirement and changing the “costs balance” in respect of tribunal cases. The APPG report did not draw any distinctions between tenants in personal occupation of their properties and other tenants.

The 2017 UPP referred at [1.1] to leasehold as a “significant and increasing tenure for new homeowners”, but the statistics cited covered all residential dwellings, whether the tenant was in occupation or not. The Government sought views on, among other topics, prohibiting the sale of leaseholds of new build houses, restricting ground rents on new leases to peppercorn rents and tackling existing onerous ground rents (page 4). As with other materials, the 2017 UPP uses the language of “consumer”, but in terms which do not draw an obvious distinction between occupying and non-occupying tenants. Thus at [3.5], the paper referred to doubts that the “leasehold discount” (a reference to the difference between the value of a freehold and a leasehold interest in the same house) is passed on by the developer “to the consumer”, and [3.7] referred to there being “1.2 million leasehold houses in the owner-occupied and private rented sectors in 2014/2015.” When addressing “the impact on consumers”, the paper identified a series of issues capable of impacting occupying and non-occupying tenants alike: it was not clear that any initial ‘discount’ on the sale price of a leasehold house reflected the additional costs faced by a tenant such as continuing and increasing ground rent, fees for consents to alter a property and the financial impact of extending the lease or buying the freehold at later time ([3.12]); and the fact that the identity of the landlord may change without their knowledge ([3.13]). The proposal to limit the reservation and increase of ground rents on all new residential leases over 21 years was justified on the basis that “leaseholders receive no return or value for the ground rent, in contrast to payment of service charges …” ([4.2]) and because of the problem with clauses with escalating ground rents ([4.6]).

The consultation closed on 19 September 2017, having received over 6,000 replies, and the Government published a summary of the responses in December 2017. The introduction by the Secretary of State for Communities and Local Government criticised the way in which leasehold ownership operated in practice in general terms:

“Leasehold should be just that, a tool for making multiple ownership more straightforward. It should not be a means of extracting ever-more cash from the pockets of already over-stretched housebuyers. Yet in the hands of unscrupulous freeholders, that is exactly what it has become.”

While there were a number of references to “homeowners” or “homes”, there were also references to issues capable of impacting on all tenants: “disproportionate costs to extend leases; poor value property management; and a slow and costly sales process” ([2]); a consultation on “proposals to regulate managing agents and give consumers a say over who their agent is” ([5]); and re-invigorating commonhold as an alternative ownership structure ([6]). As for enfranchisement, the Government stated, “we will also be working closely with the Law Commission on a wider programme of reform including…making it easier and more cost effective for all leaseholders to enfranchise…” ([6]). The Government expressed doubt as to whether the full costs of buying a house on leasehold were “priced in” ([35]), and referred to “inconsistent and inadequate protections for leaseholders who either may not wish to, or may be unable to, buy their freehold” ([37]), and that it would “consult on proposals to support leaseholders to [enfranchise] on more favourable terms” ([38]). New legislation would be introduced so that ground rents in new leases of houses and flats would be fixed at a peppercorn [69]. The Government stated that it wanted “to make it easier for leaseholders to be able to exercise their right to buy their freehold… and for this right to be available as soon as possible” and that it would “work with the Law Commission on this and consult on introducing a prescribed formula that provides fair compensation to the landlord, whilst also helping leaseholders avoid incurring additional court costs” ([72] and [86]).