[2025] EWHC 2751 (Admin)

The opening paragraphs referred to tenants lacking control over their property and having limited security of tenure, and to the ability of landlords to make decisions and pass on the cost to tenants, with the risk of abuse, bad practice and lack of transparency. They also referred to the numerous barriers (including “prohibitive expense”) to taking over control under the current legislation;

The IA stated that “government intervention is needed to help rebalance in the market and empower leaseholders to take greater control of the homes they have paid for, whilst maintaining legitimate rights of freeholders”;

The policy objectives of the overall Bill were defined as follows:

“To deliver a fairer system, where leaseholders are empowered and have greater security and control over their property, with increased transparency over the costs they are charged and improved access to redress when things go wrong – and extending the benefits of freehold ownership to more homeowners. As a result of these reforms:

1.

More leaseholders will be able to exercise rights to buy their freeholds or extend their lease and it will be easier and cheaper to do so;

2.

More leaseholders will also be able to take control of their buildings through exercising the right to manage;

3.

Leaseholders will be protected from paying insurance commissions and will be provided with better information on the service charges they pay;

4.

Where leaseholders take a dispute to court or a property tribunal, the award of legal costs will be fairer;

5.

Access to redress schemes will be extended to all leaseholders and to freehold homeowners on managed estates;

6.

Freeholder homeowners on privately managed estates will gain new rights to challenge costs and the management of their estates; and

7.

Prospective homebuyers will also get access to quicker information at a fixed cost to better inform them of the key information relating to their potential purchase.”

The IA stated that the reforms “will re-balance power for leaseholders through amendments to leasehold law, providing them with greater control, security and transparency”;

In chapter 1, addressing “the rationale for intervention”, reference was made to the different types of leaseholder ([1]), and the issues of control and transparency which leaseholders (in context, of all types) faced. At [5], the IA stated that “Government intervention is needed to help rebalance power towards leaseholders, changing this market to better empower leaseholders to have greater control and say over the management and associated costs of the homes they have paid for, whilst maintaining the legitimate rights of freeholders (landlords)”;

Paragraph [6] referred to economic market failures in the leasehold sector, including an “inherent power imbalance” between tenants and landlords, asymmetry of information, high barriers to entry and exit, and a separation of control from liability for costs;

Paragraph [7] identified other reasons to justify intervention in the leasehold market, including equity/fairness, simplifying an overly complex process and remedying the marriage value problem;

The “key challenges” section referred to the “current leasehold system” as being “in need of comprehensive reform”, “outdated and unfair, leaving the balance of power tilted too far in favour of landlords” ([23]), and to leasehold as a “time-limited asset, the value of which deteriorates over time” ([24]);

At [75], the policy objectives were summarised as being “to make the leasehold market fairer and more transparent, where leaseholders have greater security and are empowered to take control over their property and its management, with improved access to redress where things go wrong.” In the same vein Annex 2 states at [140] that “the package of reforms in respect of the valuation of premiums goes some way to addressing substantial imbalances in the market that lead to leaseholders being forced to pay high prices and fees to save their asset from depreciation and reducing the associated costs in this process”;

The IA breaks down the total number of leaseholders between owner-occupiers and private landlords on at least two occasions ([16] and [139]). At no stage was any attempt made to quantify benefits solely for the former category, nor, when considering alternatives to the legislation under review, was there any separate consideration of the position of owner-occupiers. Had the object of the bill been solely to benefit owner-occupiers, with benefits to private landlords being an unintended by-product of that object (given the difficulties of framing the legislation more narrowly), the IA would have been expected to address that;

Indeed, Annex 2 stated at [39]-[41]:

“39.

In the case of tenanted property, the transfer of marriage value is a transfer between one landlord and another. It is acknowledged that the removal of the requirement to pay marriage value will therefore benefit landlords of tenanted property as well as owner-occupiers. This is an effect of the policy objective to simplify the process, meaning that all leaseholders benefit from the reforms regardless of any other status they may hold.

40.

To exempt landlords from the marriage value transfer would complexify the law, when our policy objective is to simplify it. The original 1967 Act did indeed only confer enfranchisement rights to resident leaseholders, but the 2002 Act later repealed the residency test. The reforms do not include differential pricing between owner-occupiers and landlords, on the grounds firstly of complexity and secondly of unintended consequences. For example, freeholders may be incentivised to sell to landlord-leaseholders rather than owner-occupiers, being able to receive higher premiums from them, and “accidental” landlords, such as those who’ve inherited property or who have had to move out of their primary residence, but do not own another, would find themselves paying the differentially higher price.

41.

Exempting landlords might also impose costs on the tenant, say, where a lease is running down to 80 years, and the landlord can’t afford to pay the marriage value, and so has to sell the property to prevent the diminution of his interest, and evict the tenant. Alternatively, if the landlord proved unable to prevent the lease from falling to 80 years or below, since his interest would be diminishing, so might his commitment to maintaining the property in good standard. Furthermore, the existence in the market of properties liable for marriage value reduces market liquidity, since they are difficult or impossible to mortgage.”