[2025] EWHC 2751 (Admin)

Fecha: 24-Oct-2025

The LFRA 2024

The LFRA 2024

71.

What changes does the LFRA 2024 make to the rights of enfranchisement which resulted from legislation over the 50-year period from 1967 to 2016? The LFRA comprises 125 sections (in 9 Parts) and 13 schedules, and is nearly 400 pages long. (Footnote: ²) But this case is essentially concerned with Part 2 of the LFRA 2024, “Leasehold enfranchisement and extension”.

72.

Section 33 replaces the right of the tenant of a house under the LRA 1967 to obtain a 50-year lease extension, and the right of the tenant of a flat under the LRHUDA 1993 to obtain a 90-year lease extension, in each case with a right to obtain a 990-year lease extension at a peppercorn rent.

73.

Section 35 replaces the existing valuation provisions for a freehold acquisition or lease extension in respect of a house under s.9 of the LRA 1967 with the regime created by s.37 of the LFRA 2024. Section 36 effects a similar change so far as the valuation provisions for collective enfranchisement or the granting of a new lease under the LRHUDA 1993 are concerned.

74.

The regime for freehold acquisition for houses under the original s.9 of the LRA 1967 (low value houses) is left unchanged.

75.

In respect of these rights of enfranchisement, and subject to the right of certain tenants under s.46 to avail themselves of their enfranchisement rights under the LRA 1967 where these are more favourable, s.37 provides for a new regime where “the price payable is … the market value”, Schedule 4 setting out “how the market value is to be determined”:

For a freehold enfranchisement the “market value is the amount which the relevant freehold could have been expected to realise if it had been sold on the open market by a willing seller at the valuation date” (para. 2(2) of Schedule 4).

ii)

For leasehold extensions “the market value is the amount which the notional lease could have been expected to realise if it had been sold on the open market by a willing seller at the valuation date” (para. 3(5)).

iii)

In all cases, “it must be assumed that … the claimant is not seeking and will not seek to acquire the relevant freehold or notional lease” (para. 17(3)(a)) with a similar assumption for the nominee purchaser in a collective enfranchisement (para. 17(3)(b)). The effect of these provisions is to remove marriage value and hope value from the calculation of market value in those cases in which it would previously have applied: “the Marriage Value Reform”.

iv)

When calculating the value of the right to receive ground rent under the lease for the purposes of step 1 of the prescribed valuation methodology (para. 25), “as respects any period when the notional annual rent for the current lease is lower than the actual annual rent, the notional annual rent must be used instead” (para. 26(3)). Paragraph 26(4) defines the “notional annual rent” as “0.1% of the market value of the premises being valued”, which:

in the case of a freehold enfranchisement or lease extension under the LRA 1967, is the amount which the freehold of the premises being valued could have been expected to realise if it had been sold on the open market with vacant possession by a willing seller at the valuation date;

in the case of a collective enfranchisement or lease extension under the LRHUDA 1993, is the share of the relevant freehold market value which is attributable to the premises being valued.

We refer to this provision as “the Ground Rent Cap”.

76.

Sections 38 and 39 amend the costs regimes applicable under both the LRA 1967 and the LRHUDA 1993:

Under the LRA 1967 and the LRHUDA 1993, a tenant who initiated the enfranchisement process was liable for the landlord’s non-litigation costs (as defined) of dealing with the enfranchisement claim (by virtue of ss.9(4) and 14(2) of the LRA 1967 and ss.33(1) and 60(1) of the LRHUDA 1993).

ii)

The effect of ss.38 and 39 of the LFRA 2024 is that the tenant and the landlord are generally each responsible for their own non-litigation costs with the following exceptions:

Withdrawn or failed claims: a tenant is liable to the landlord for a prescribed amount in respect of non-litigation costs if the tenant's claim to enfranchisement ceases to have effect other than for a “permitted reason”;

Low value claims: where the price payable by the tenant for enfranchisement is less than a prescribed amount, and the landlord’s reasonable costs are higher than the price payable, the tenant is liable to pay the landlord the difference between the price payable and the landlord’s costs up to the prescribed amount;

To the extent that the landlord incurs additional costs because the tenant makes an election which lowers the premium, or where the tenant requires the landlord to take a lease of units in the building which are not part of a collective claim: elective leasebacks.

iii)

We refer to these provisions as the “Costs Recovery Reform.”

77.

Finally, as we have mentioned, there are two other provisions which are not the subject of claims for a DoI in themselves, but which C&G contend should be brought into account when considering their challenge to the Marriage Value and the Ground Rent Cap as well as the separate challenge to the Costs Recovery Reform:

The permissible internal floor area devoted to non-residential use for a building to be eligible for enfranchisement under the LRHUDA 1993 has been increased from 25% to 50% (s.32 of the LFRA 2024).

ii)

Where there are non-participating tenants in a building which is subject to collective enfranchisement, the landlord previously had an option as to whether to accept a leaseback of those units (s.36 and sched.9 of the LRHUDA 1993), but under the LFRA 2024 it is compulsory for the landlord to accept a leaseback (s.32 of the LFRA 2024).