[2025] EWHC 2751 (Admin)

Some of the claimants’ experts presented a detailed critique of the IA. In particular, criticisms were advanced in the expert reports of Mr Roberts and Mr Hunt. C&G have gone so far as to submit that their “expert evidence in this litigation has dismantled the quality, accuracy and adequacy of the IA, identified serious flaws in the ground rent calculation …. and proves that significant gaps in the analysis remain unrectified”.

Before considering where that expert evidence leads, it is important to keep in mind the nature of the exercise which the court is required to undertake. On this issue, we adopt the analysis set out in ALR [110]-[117] and [224]-[225]. In summary:

The IA was reviewed pursuant to the “Better Regulation Framework” (“the BRF”), under which the RPC, as a body independent of Government, seeks to ensure that legislative reforms have a clear evidence base. The BRF involves assessing:

The RPC assesses the quality of evidence and analysis used to inform the Government’s regulatory proposals, including the IA, for the purpose of giving Ministers and Parliament confidence that the evidence and analysis is fit for purpose. In this case, drafts of the IA were circulated internally over a three month period, culminating in a presentation by a team of policy and analyst officials to the RPC. The RPC found the IA “fit for purpose”, while identifying areas for improvement. It concluded that the DLUHC had provided “sufficient evidence to support the estimation of the EANDCB for those measures introduced by the Bill.” The RPC also said that the IA made “good use of data and evidence available from a range of sources, including surveys, administrative data and consultations”. We do not accept the claimants’ suggestion that the RPC was only concerned with the EANDCB, the RPC also being concerned with the NPSV, and the IA’s sourcing and use of data more generally. As with the OBR’s approval in ALR, we attach particular importance to that approval when considering the claimants’ criticisms of the IA.

In summary, Mr Roberts and Mr Hunt advanced the following principal criticisms of the IA:

At the hearing, the criticisms of the IA were more narrowly focussed, at least for the purposes of oral submissions. We have dealt with the issues as to the data set above. The other two points concerned the two errors admitted by the Secretary of State.

The first concerned the error which the Secretary of State’s team identified and drew to the claimants’ attention, which led to the Addendum IA. This had two elements. The first concerned the uprating of ground rents to simulate increases over time. This had used RPI forecasts from the OBR but did not fully align with OBR assumptions, and in any event a typographical error was made in reproducing the relevant formula. The second concerned discounting of ground rents in the Term valuation, and the removal of an inflation deflater which was appropriate for Government calculations more generally, but was not appropriate for the IA, given the stated desire to simulate standard market practice valuation in which no such deflator is used. We would note that neither error is suggestive of some systemic deficiency in the IA. As to the effects:

Second, a methodological error was identified by Mr Hunt very shortly before the hearing which impacted one aspect of both the IA and the Addendum IA, namely the calculation of NPV. In short, the calculations of the effects of the Marriage Value Reform, Ground Rent Cap and Costs Recovery Reform in the LFRA 2024 related to amounts which would reduce the sums payable by tenants to their landlords to enfranchise. An over-estimate would over-state the overall level of that reduction, an under-estimate would have the converse effect. That made it inappropriate, when calculating “high” and “low” estimates, to subtract the low estimate of value obtained by tenants from the high estimate of value lost by landlords. The effect of the error was presented by C&G’s expert, Mr Hunt, for all three measures as set out in a letter from C&G’s Solicitors dated 11 July 2025 and which we reproduce below (the Secretary of State’s team did not have sufficient time to produce a revised range, but the direction of travel is not disputed):

Mr Maurici made two points about these admitted errors.

The first was the very significant adjustment which resulted from the correction made in the Addendum IA of the ground rent error. As to this argument, the revised figure still appeared within the range of costs figures in the IA, from which the considerable uncertainties attaching to what was, on any view, a very large figure for the costs impacts on landlords would have been obvious. While the upper end of the range of total costs increased from £3,899.1m to £4,319.6m, the considerable uncertainty attaching to both figures was made clear, together with the scale of potential cost impacts. That is also clear from the figures presented in the IA as to the effect of the removal of marriage value on the valuation of leasehold properties, of £7.1bn in England and £7.2bn in England and Wales (figures which are very similar to the £7.281bn calculated by C&G’s experts) which reflected the benefit to tenants of no longer having to pay marriage value to landlords and, as we have noted, was not limited to a 10-year time horizon. Mr Hunt also suggested that, once allowance is made for the second error, the £513m error corrected in the Addendum IA lies considerably outside “the margin of sensitivity for the NPV” (i.e. the range of overall economic impacts of the LFRA 2024 in NPV term). This narrowed considerably following the correction of the second error. However, we accept the evidence of Ms Fleming and Ms Crowther for the Secretary of State that the range of costs figures is more relevant in this context. This is because the modelling of ground rent, in which the error corrected in the Addendum IA features, was the modelling of costs. As the costs involved an adverse change in the position of landlords and a corresponding improvement in the position of tenants, they net off in the NPV calculation.

The second was the effect of the second of these errors on the range of NPV benefit figures. On Mr Hunt’s calculations, this involved a change from an original range of minus £1.493bn to plus £1.51bn to a range of either plus £62m to plus £139m or plus £113m to minus £96m depending on which of two possible methodologies is used. The experts agreed that neither the central NPV estimate nor the total estimate of costs and benefits was affected by this error. Mr Maurici suggested that the revised figures suggested a much lower potential upside for NPV, as well as much lower potential downside, than the IA, albeit an essentially unchanged NPV. We do not accept that this has any significant impact on the weight to be attached to the IA: if anything, the reliability of the central case as to NPV would be reinforced by the significant narrowing of the range. As we have said, there is a dispute as to whether the effect of this second error might be to move the effect of the first error identified in the previous paragraph outside the range of NPV estimates provided. Whether or not that is so, we do not accept that it materially undermines the IA, which clearly presented very significant adverse potential effects on landlords, which might well have been far in excess of the upper end of the 10-year costs range, given the valuation impact on leasehold properties set out in the IA.

It follows that we do not accept any of the claimants’ criticisms of the IA. It was a bona fide and methodologically rational exercise for estimating the effects of the LFRA 2024 and the sensitivities of the measures assist the claimants.

Finally, Mr Roberts refers in his report to “local variation in overseas ownership” with higher levels in PCL. Mr Hunt criticises the IA for failing to “distinguish between costs and benefits that accrue to UK residents or businesses versus foreign ones”, referring to para. 2.3 of HM Treasury’s Green Book which states that “social or public value … includes all significant costs and benefits that affect the welfare and wellbeing of the population”. He argues that the Government should seek to assess the welfare benefits for the population served by the Government, and that the benefit to overseas residents should have been excluded. These passages formed the basis for a submission by Mr Maurici that the IA was flawed and/or could not be relied upon because it had failed to calculate how much of the benefit would be to tenants residing outside the UK.

We believe Mr Hunt was intending to refer to para. 2.1 of the Green Book (May 2022). This, in relevant respect, provides:

“Principles of appraisal

Appraisal is the process of assessing the costs, benefits and risks of alternative ways to meet government objectives. It helps decision makers to understand the potential effects, trade-offs and overall impact of options by providing an objective evidence base for decision making.

Appraisal: The appraisal of social value, also known as public value, is based on the principles and ideas of welfare economics and concerns overall social welfare efficiency, not simply economic market efficiency. Social or public value therefore includes all significant costs and benefits that affect the welfare and wellbeing of the population, not just market effects. For example, environmental, cultural, health, social care, justice and security effects are included. This welfare and wellbeing consideration applies to the entire population that is served by the government, not simply Taxpayers ... ”

We are not able to derive from para. 2.1 a requirement to separate out benefit (or for that matter cost) as between UK and non-UK residents, although we accept this may well be a relevant consideration. The IA was alive to this issue, but dealt with it briefly at [140]:

“The Government is aware that some leaseholder landlords are overseas investors, but would note that some freeholders are overseas investors too.”

The Law Commission in the course of the consultation process heard different views on this issue. The Law Commission’s Valuation Report, [3.76] referred to a suggestion that making enfranchisement cheaper would “result in a one-off transfer of equity” which, in PCL, “may” cause “a resulting leakage of wealth out of the UK” (a submission from Cluttons, Mr Roberts’ firm). The immediately following para. ([3.77]) records a submission that “there are … a number of foreign controlled funds who have invested on the basis of stable law and stable institutions in this country, and it is likely to be the case that any shift in value from landlords to lessees is likely to damage this country’s international reputation as a safe haven for investors”. The Law Commission did not recommend drawing such a distinction by reference to residence or, indeed, tax domicile. This was something which had not hitherto featured in the statutory enfranchisement regime and would have taken enfranchisement rights away from some leaseholders, including foreign resident leaseholders whose property was used for residential purposes only, and not rented out. This was a point made in a submission to the Housing Minister of 6 November 2023 (page 4).

In circumstances in which the claimants have made much of those who they say are the ultimate economic or practical beneficiaries of their freehold property portfolios, we can see formidable difficulties in attempting to produce the type of calculation now said to be vital to the IA. The claimants themselves have only offered qualitative rather than quantitative assessments (and only of the tenant and not the landlord side). We would take some persuading that the failure to embark on that difficult process, in circumstances where the LFRA 2024 itself was not seeking to single out “foreign” tenants, rendered the IA inappropriate for its task. We have not been so persuaded.

Finally, we briefly summarise the evidence from the various claimant groups as to the impact of the LFRA 2024 on them individually, which was not seriously challenged in its broad effect and which, we accept, is significant on any view.

So far as the ARC claimants are concerned:

Turning to the C&G claimants:

As to the Abacus claimants, the impact of the measures under challenge on their portfolio value has been estimated as a loss of about £147 million, caused primarily by the fact that the measures will reduce the premiums payable by (and costs recoverable from) all tenants on enfranchisements.

As to the Wallace claimants:

John Lyon’s Charity estimates it annual loss from the removal of marriage value at about £1.37million.

The Portal Trust estimates that the amount payable on the enfranchisement of qualifying properties under its two leases with SHA would be reduced by between 43-47% as a result of the LFRA 2024, with loss of marriage value for the whole estate estimated at £52m at March 2021 values.