[2025] EWHC 2751 (Admin)

A1P1 provides that “no one shall be deprived of his possessions except in the public interest …”. In this context, the Grand Chamber in Hutten-Czapska referred to “the principle of legitimate aim in the general interest”.

We accept the submission of Ms. Wakefield for the Wallace claimants that it is for the court to determine what was the aim (or were the aims) of the three measures under challenge, applying the principles set out above. Having done so, when it assesses the legitimacy of that aim, the court will respect Parliament’s judgment on the public interest unless it is “manifestly without reasonable foundation” (Hutten-Czapska at [166]). That expression simply reflects the wide margin of appreciation accorded to the socio-economic regulation of housing by the state (see SC at [159] and Adriatic at [114]).

In James the ECtHR gave a wide margin of appreciation to the UK’s enactment of the LRA 1967 ([46]-[47]). The decision to make laws authorising the expropriation of property rights commonly involves political, social and economic issues on which opinions within a democratic society may differ widely. That has continued to be the approach in Strasbourg to the regulation of housing.

In Wilson Lord Nicholls said that the fairness of a system of law governing the contractual or property rights of private persons is a matter of public concern and so legislation intended to bring about such fairness is capable of being in the public interest, even if it involves the compulsory transfer of property from one person to another [68]. Then at [70]:

“In approaching this issue, as noted in R v Johnstone [2003] 1 WLR 1736, 1750, para.51, courts should have in mind that theirs is a reviewing role. Parliament is charged with the primary responsibility for deciding whether the means chosen to deal with a social problem are both necessary and appropriate. Assessment of the advantages and disadvantages of the various legislative alternatives is primarily a matter for Parliament. The possible existence of alternative solutions does not in itself render the contested legislation unjustified: see the Rent Act case of Mellacher v Austria (1989) 12 EHRR 391, 411, para 53. The court will reach a different conclusion from the legislature only when it is apparent that the legislature has attached insufficient importance to a person's Convention right. The readiness of a court to depart from the views of the legislature depends upon the circumstances, one of which is the subject matter of the legislation. The more the legislation concerns matters of broad social policy, the less ready will be a court to intervene.”

The court held that a bar to the enforcement of any loan agreement for failing to include a correct statement of the amount of credit pursued the legitimate aim of consumer protection and was not disproportionate, although it would provide a windfall to some borrowers who had suffered no prejudice at the expense of some lenders who had acted in good faith ([72]-[74]).

In AXA Lord Reed said at [131]:

“At the domestic level, the courts also recognise that, in certain circumstances, and to a certain extent, other public authorities are better placed to determine how those interests should be balanced. Although the courts must decide whether, in their judgment, the requirement of proportionality is satisfied, there is at the same time nothing in the Convention, or in the domestic legislation giving effect to Convention rights, which requires the courts to substitute their own views for those of other public authorities on all matters of policy, judgment and discretion. As Lord Bingham of Cornhill observed in Brown v Stott [2003] 1 AC 681, 703:

“Judicial recognition and assertion of the human rights defined in the Convention is not a substitute for the processes of democratic government but a complement to them. While a national court does not accord the margin of appreciation recognised by the European court as a supra-national court, it will give weight to the decisions of a representative legislature and a democratic government within the discretionary area of judgment accorded to those bodies.””

In SC Lord Reed referred at [208] to the caution which a court should exercise if a case involves a matter of “intense political controversy”. It may be that the proportionality question cannot be answered by any process of legal reasoning and that it can only be answered in a Parliamentary democracy through a political process which can take into account the values and views of all sections of society. In such a case a democratically elected institution is in a far better position than the courts to reflect where the balance of fairness lies. This approach may apply where one aim of a measure involves distributive justice or redistribution (see the Court of Appeal per Leggatt LJ as he then was in [2019] EWCA Civ 615; [2019] 1 WLR 5687 at [158] and R (ALR) v Chancellor of the Exchequer [2025] EWHC 1467 (Admin) at [80]).

The claimants suggested that if the aims of the three measures did not involve meeting a “pressing social need”, the width of the margin of appreciation should be reduced in the assessment of proportionality and in the striking of a fair balance. They sought to draw a distinction between a measure meeting a pressing social need as opposed to one based merely on a “broad social policy”, the latter attracting less weight.

In order to support that argument Ms Wakefield relied upon Lindheim. As we have said, that case concerned s.33 of the Ground Lease Act 1996 as amended, a provision which the Court described as “essentially motivated by policy considerations” [11] with a cross-reference to [47]-[51]. Those paragraphs referred to a proposal by the Norwegian Ministry of Justice to address the impact of existing law on lessees unable to extend their leases, or to purchase their plots, by providing that lessees would be able to continue their lease agreements on the same terms. They relied upon “social policy considerations on the side of the lessee” as being “decisive” because of the financial difficulties in which lessees would find themselves if landlords could increase “ground lease rent up to the market level”. At [97], the ECtHR said that it appeared that in adopting this solution “Parliament attached considerable weight to social policy considerations in the area of housing.”

The Court appears to have linked Parliament’s reference to “social policy in the area of housing” with the background to a different provision of the Ground Lease Act, s.15, which was not under challenge but limited the contractual right to increase ground lease rents. The Court referred to a previous removal of controls on s.15 increases which had “made drastic inroads into a number of families’ and single persons’ household budgets”, and suggested that “presumably, this experience in relation to s.15 was also capable of shedding light on the social policy considerations militating in favour of the introduction of s.33” [98].

It is against that, with respect, somewhat unclear background that the Court contrasted at [99] and also [130] “addressing situations of potential financial hardship and social injustice” with “social policy in a broad sense” suggesting that s.33 “most likely” had a broader reach falling into the latter category. On the basis of this slender material Ms Wakefield sought to draw a distinction between what she referred to as “pressing social need” and “social policy in a broad sense”, with the latter having reduced justificatory power. However, no authority, let alone clear and constant jurisprudence of the ECtHR, was cited to support this distinction in relation to A1P1. Lindheim is not an authority on this point. The decision was essentially based on the six points we have summarised at [101] above.

However, the House of Lords addressed this issue in the Countryside Alliance case. Lord Brown (with whom Lord Rodger and Baroness Hale agreed – see [90] and [121]) pointed out that the HRA draws a distinction between Articles 8 to 11 on the one hand and A1P1 on the other. The former prohibit interference with human rights such as respect for private and family life and freedom of expression, subject to restrictions which inter alia are “necessary in a democratic society”. That test does involve considering whether there is “a pressing social need” to justify the interference (see [45] and [120]). It is stricter than the “public interest” or “general interest” required to justify an interference with the rights protected by A1P1 ([155]-[156]). As Lord Brown pointed out, following James at [51], A1P1 does not contain a “strict test of necessity” unlike inter alia Art.8. Under A1P1 the weight to be given to a social need or policy is a matter for the legislature within its appropriate margin of appreciation.

That said, we accept that at the “fair balance” stage of the enquiry, the justificatory power of legitimate objects of legislation may vary. As Lord Sales observed in his FA Mann Lecture, p.23:

“If the legitimate purpose is broad, a wider range of interfering measures will be proportionate to achieving it. If the aim pursued is to promote a weighty public interest, it will be easier for the state to show that the interfering measure strikes a fair balance.”

Ms. Carss-Frisk submitted that the margin of appreciation should also be narrowed because of what she described as a retrospective effect of the legislation. In particular, she said that the Ground Rent Cap may reduce the landlord’s term value compared with his contractual right to receive ground rent to the end of the term. She suggested that this measure therefore retrospectively affects an existing contractual right.

The other two measures operate differently. Under the terms of the lease the landlord does not generally have a right to a share of marriage value if the reversion and the lease are merged, nor a right to be paid non-litigation costs in the event of enfranchisement. The landlord’s entitlements to a share of marriage value and to those costs arise, in the event of the tenant exercising a right to enfranchise, as incidents of the enfranchisement code before amendment by the LFRA 2024. Although a landlord would not receive any marriage value if a lease should run to the end of its term, Ms. Carss-Frisk says that a landlord had an expectation that in the event of enfranchisement taking place, it would receive a half share of marriage value and non-litigation costs, in addition to the term value without any cap. She says that the LFRA 2024 operates retrospectively in relation to that pre-existing contractual right and those two expectations.

We do not accept that the margin of appreciation in relation to all or any of the measures challenged should be reduced on account of retrospectivity. The general position is that legislation which affects existing rights prospectively is not retrospective or retroactive (see e.g. Lord Rodger in Wilson [2004] 1 AC 816 at [186]-[192]). The very purpose of legislation is to alter an existing legal situation, which will often involve altering existing legal rights for the future. So a person does not have a right or expectation to the law continuing as it has stood in the past. For example, in tax law it is imperative that legislation conforms to changing social needs and government policy. A taxpayer may plan his financial affairs on the basis of existing tax laws remaining unchanged, but in doing so he takes a risk as to whether they do in fact change (Wilson at [192]).

A1P1 requires an interference with the protected right to be lawful. The ECtHR requires domestic law to be adequately accessible and sufficiently precise to be foreseeable in its effects (Lord Reed in AXA at [119]). But changes in civil law frequently and properly affect legal relationships established before the change was made, for example family law, and the rights and responsibilities of homeowners and employers. A person cannot expect the law affecting his position as a homeowner to remain unchanged during his period of ownership [120]. There are degrees of retrospectivity, a spectrum. A distinction may be drawn between laws which alter prospectively the rights and obligations arising from pre-existing legal relationships and laws which alter such rights retrospectively, for example, in relation to accrued or vested rights such as debts (see e.g. Granada UK Rental & Retail Limited v Pensions Regulator [2019] EWCA Civ 1032; [2020] ICR 747 at [55]-[66] and Adriatic). It may be more difficult to justify laws in the second category because they have a greater effect on legal certainty. Nevertheless, there may be such a justification, in particular where legislation has a remedial purpose (AXA at [121]).

It cannot be said that the present cases involve an interference with an accrued or vested right. The Ground Rent Cap does not affect a landlord’s entitlement to ground rent which has fallen due before the valuation date, namely the date when the claim to enfranchise was made. Nor does it affect a landlord’s right to continue to receive rent at that level for so long as the existing lease continues. The Ground Rent Cap simply regulates the terms on which a compulsory transfer of a proprietary interest may take place after the LFRA 2024 comes into force. It only applies to the assessment of the term value in relation to the residue of the term, which is forward looking and does not apply to rent already accrued due.

In relation to the measures removing a landlord’s entitlement to half of any marriage value and to non-litigation costs, we have explained at [153]-[155] why the concept of retrospectivity is not engaged. We have not been shown anything to suggest that landlords were given an expectation by Government or by Parliament that the statutory code would remain unchanged. At the most it could only be said that landlords assumed, hoped, or took a risk, that the law would not be amended.

Ms. Carss-Frisk relied upon In re Recovery of Medical Costs for Asbestos Diseases (Wales) Bill [2015] UKSC 3; [2015] AC 10 where the House of Lords held that the legislation in issue had a degree of retrospectivity. But that legislation extended the liability of insurers to indemnify employers in respect of events which had already occurred, and under policies which they had underwritten, before the enactment. The legislation amended pre-existing contracts so as to cover loss which at the time of those contracts and of the loss in question was not recoverable (see e.g. [41]) by creating a liability for events which had already occurred at the date the statute came into effect.

By contrast, the measures under challenge in these proceedings apply prospectively to future claims to enfranchise and do not affect the rights between landlord and tenant in respect of past exercises of the right to enfranchise. In this respect, they are like the LRA 1967 and the HA 1969 and 1974 which were considered in James, where it was not suggested that the reforms were retrospective for ECHR purposes and needed a particularly compelling justification for that reason.

Lastly on this subject we note that in its Valuation Report (see [217] below) the Law Commission said this at [3.96]:

“Moreover, landlords cannot assume that the existing valuation methodology, or existing legal regime, will continue indefinitely. The introduction of the first enfranchisement legislation in 1967 (which provided a favourable basis of valuation to leaseholders) would have significantly reduced the value of many landlords’ assets. Similarly, when the enfranchisement regime was extended to flats in 1993 and further expanded in 2002, that had significant implications for landlords. The law is reformed, and that has implications for very many people. Landlords cannot expect that the current valuation methodology will always remain the same. When investing, it is standard practice to consider the risk, and make allowances for risk. For example:

(1)

there is a risk of higher taxes being levied on property owners who are not owner-occupiers; and

(2)

when landlords have invested in ground rents, particularly onerous ground rents, they should have considered the risk of future regulatory intervention which could reduce their contractual entitlement to the ground rent.”

We agree with that passage, which has particular force given the legislative history and initiatives concerning this important area of social policy.

Taking into account the analysis below of the materials leading up to the enactment of the LFRA 2024 and the aims of the legislation, we conclude that a broad margin of appreciation should be given to the legislature’s enactment of the three measures under challenge. In summary:

We will keep the margin of appreciation under review when considering the A1P1 issues specifically in relation to the measures challenged.