[2025] EWHC 2751 (Admin)

We have already dealt with the argument that in order to be compatible with A1P1, the LFRA 2024 needed to include an exemption so far as the removal of marriage value and the Ground Rent Cap are concerned for landlords with charitable status. In oral submissions, Mr Westgate KC principally focussed on arguments which arose from the specific and historic position of the Portal Trust and Leases A and B. In short, he submitted that the LFRA 2024 can never have been intended to apply to Leases such as the A and B Lease, in which the tenant was essentially a large and well-resourced corporate entity, which was not itself using the leased properties for residential purposes. He submitted that whatever arguments might arise as to inequality of bargaining power when dealing with owner occupiers or leaseholders of a small number of flats, they clearly have no application to a professionally advised and well-resourced entity who entered into a high value transaction for commercial purposes, fully cognisant of the terms and implications of the transactions it was entering into.

In effect, this argument is a more refined version of the argument advanced by the claimants more generally, that the objects – or at least the legitimate objects – of the LFRA 2024 were limited to improving the position of owner-occupiers, or at least smaller scale investors. However, we have already set out our reasons for concluding that the legitimate objects of the LFRA 2024 were not so limited, but were concerned with addressing what had been identified as fundamental deficiencies in leasehold as a form of property ownership, namely the wasting nature of the tenants’ asset despite the economic contributions made by tenants, the unfair imbalance in the relationship and the lack of security and control involved in leasehold ownership. We were offered no reason as to why those criticisms which Parliament set out to address were not equally present in the current transaction, in which SHA paid a significant premium for the two leases and now, at least on its own account, finds itself in difficulty in raising funds for renovations of the estate properties because of the period remaining on the leases.

Nor are we persuaded that the Portal Trust’s Article 14 argument, based on alleged Thlimmenos discrimination, adds materially to the A1P1 argument in this case. The objects of the LFRA 2024 apply as much to a landlord in the position of the Portal Trust as to a landlord who has entered into multiple leases, or a single lease relating to multiple properties, or a single lease relating to a single property. Whether considered at the stage of the scope of the LFRA 2024 generally, or the failure to make an exemption by reference to the Portal Trust’s “other status” where no “suspect ground” is engaged, Parliament enjoys a wide margin of appreciation, and the measures under challenge do not fall outside that margin.

Finally, it is important to place the Portal Trust’s arguments in context. It was the CLRA 2002 which removed the legal impediment which had previously prevented SHA from enfranchising, namely the residence requirement. No challenge was brought to that statutory reform by the Portal Trust, and it is not open to the Portal Trust to contend that its A1P1 rights are infringed simply because SHA may enjoy a statutory right to enfranchise. Its complaint now is, in effect, that SHA should not benefit from the Ground Rent Cap and removal of marriage value because it is a business and because, in effect, those reforms will make it more likely that the SHA would exercise any rights of enfranchisement it may have. However, the objectives of the LFRA 2024 included making existing rights of enfranchisement cheaper for those who already had them, and, specifically in the context of the three reforms:

The Portal Trust did not explain why those legislative objects were not equally applicable to a tenant in the position of the SHA and why the SHA, which has since 2002 been subject to the same enfranchisement regime as other tenants, should not benefit from legislation intended to address the perceived inadequacy in that regime.

The Portal Trust did, however, rely on the fact that “regulated leases” for the purposes of the Leasehold Reform (Ground Rent) Act 2022 are limited to leases for single dwellings (s.1), with the result that the prohibition on rents greater than a peppercorn (s.3) is similarly so limited. Likewise, the prohibition on new leases of houses contained in Part 1 of the LFRA 2024 only applies where the lease demises “one house, with or without appurtenant property and nothing else” (Condition B in s. 5). However these are outright prohibitions relating to the terms or subject-matter of future leases, rather than the assessment of enfranchisement compensation in relation to existing interests on a basis which remains reasonably related to market value. While they assist the Portal Trust in arguing that a limitation of the kind it says should have been made would have been feasible from a drafting perspective (as do the other legislative references to “single dwellings” to which the Portal Trust referred), they do not establish that the absence of a similar limitation in a legislative provision with a different object and content fails to draw a fair balance between the competing interests for A1P1 purposes.

Finally, the Portal Trust submits that the exception in sched. 2 para, 23(7)(b) is too narrowly drawn, because of the difficulty, with leases of the antiquity of Leases A and B, of showing the premium was reduced to justify a higher ground rent. The materials presented by the Portal Trust do not suggest that the ground rent was justified by a higher premium (the agreed ground rent remaining the same even as the premium was reduced during negotiations from £2.7m to £2.275m, at a time when the property market conditions were recorded as deteriorating). In any event, however, whatever evidential difficulties might be faced by the Portal Trust in respect of this singular transaction does not, in our view, take the ambit of the exemptions outside the scope of Parliament’s legislative margin of appreciation. (For the general position see [380(iii)] above).