[2025] EWHC 2751 (Admin)

The essential thrust of the submission made by John Lyon’s Charity is that, even if the removal of marriage value from the enfranchisement premium could otherwise be viewed as involving a fair balance of the objects of the legislation with the interference with landlords’ A1P1 rights, that is not the case for landlords with charitable status because of the effect on their grant-making abilities.

As we have explained, this issue was considered extensively in the pre-legislative period, and the view consistently adopted by the Law Commission and the Government was that it was not appropriate to make an exception for freeholds held as an investment by charities for three reasons: the freeholds represented an investment made for monetary benefit as much for charities as other owners of freeholds; from the perspective of tenants, the unfairness inherent in leasehold as a form of tenure applies as much to those who held their leaseholds subject to the superior title of charities as for other landlords; and there was a risk of increased complexity and market distortion if charity landlords were treated differently. Those views were clearly articulated in Parliament during the passage of the Bill through Parliament, and attempts to include an exemption for charities failed to secure sufficient Parliamentary support for them to be put to a vote.

In those circumstances, the decision not to exempt charities from the removal of marriage value is entitled to a considerable margin of appreciation, and we conclude that there is no sufficient basis for challenging that decision in these proceedings. The argument that the use to which a landlord would put the proceeds of an investment merits exemption from what would otherwise be the proportionate pursuit of a legitimate object is not an obviously compelling one. As Ms Crowther observed in her evidence on behalf of the Secretary of State, it was open to Parliament to take the view that “the good work of a charity in its expenditure is separable from the charity as freeholder, where it raises its revenue.” As investors, charities operate in the same market as others investing in the same field of activity, and the effect of the exemption would be to place charities at a considerable competitive advantage as against other investors in the same asset class. The arguments which John Lyon’s Charity has employed would be equally applicable to legislative interference with any asset class in which charities carried significant investments – to take intentionally unlikely examples for the purposes of illustration, investments in cryptocurrencies, electronic cigarettes, e-bikes or hydrocarbons. They are also potentially applicable to freeholds owned by particularly philanthropic non-charitable entities.

In this regard, we note the observations of the ECtHR in Karibu Foundation v Norway Application No 2317/20 (ECtHR judgment 3, April 2023). At [69], the Court noted that the applicant (a foundation supporting religious activity) had submitted “that a heightened scrutiny of the proportionality of the interference should be carried out in the light of Article 9 of the Convention, given the applicant organisation’s activities.” At [71], the Government responded that “the individual circumstances of the parties to the domestic case … could not be decisive; the purpose of legislating would suffer if the legislature could only adopt discretionary and generalised clauses.” At [93]-[94], the Court found that a “fair balance” had been struck and that the domestic courts had “adequately balanced the applicant’s personal interests against the more general public interest in the case.”

John Lyon’s Charity sought to rely on the LFRA 2024’s treatment of the National Trust and charitable or certified community housing trusts in support of its arguments. However, the holding of property formed part of the core charitable mission of those entities, rather than a commercial investment activity, the proceeds of which were intended to fund other charitable activities. We conclude that the distinction drawn by the LFRA 2024 in this respect, and the basis for it articulated in the passages in the ECHR Memorandum to which we have referred, strikes a fair balance and falls within the legislature’s margin of appreciation. Nor, if the matter were to be argued with reference to Article 14 of the ECHR, are we persuaded that the differential treatment of the National Trust and John Lyon’s Charity (and other charities whose holding of freeholds forms part of their investment activity rather than core charitable objects) strikes an unfair balance or otherwise falls outside Parliament’s margin of appreciation.

Finally, we note that John Lyon’s Charity accepted that “if marriage value is indeed an unfair and unreasonable overpayment, then there is a logic to acknowledging that to be so irrespective of the identity of the freeholder”. However, that is indeed a view which Parliament has, and was entitled to, come to. We would similarly observe that if (as we have found to be the case), Parliament has concluded that ground rents above 0.1% of the FVPV are onerous and, to that extent, should not be reflected in the calculation of the enfranchisement premium, then that observation is equally applicable to enfranchisement claims against landlord charities.