[2025] EWHC 2751 (Admin)

We have summarised relevant legal principles at [168]-[170] above. As we noted, the central question is not whether less restrictive measures could have been adopted, or whether the state can prove that its legitimate aim would not be achieved without its selected measure; rather it is whether in adopting its measure and striking the balance it did, the legislature acted within the margin of appreciation allowed to it.

In the present context, the first “less intrusive” measure for which the claimants argued was that the Ground Rent Cap should have been limited to enfranchisement by certain classes of tenant: those in some form of financial hardship, owner-occupiers or some combination of the two.

As to that:

Second, there was some limited attempt to suggest that the issue of high ground rents could have been tackled voluntarily, with particular claimant groups referring to their own efforts. However, that suggestion was repeatedly considered in the course of the pre-legislative and legislative consideration and rejected. We have referred to Parliamentary consideration above and the issue is also addressed in the IA, [78]. The responses received to the various consultation processes undertaken by the Law Commission, Government, Parliament and the CMA revealed ongoing issues with the level of ground rents for many tenants. A summary of some of those responses is given in the witness statement by Ms Crowther. It is clear that, notwithstanding the voluntary actions taken by some landlords (some 60 of whom signed the Government’s “public pledge” aimed at a sub-set of ground rent escalation provisions), levels of ground rent remained a real issue for a significant number of tenants.

The next, less intrusive, measure which it is suggested could have been adopted was a Ground Rent Cap higher than 0.1%. (Footnote: ⁴) As noted at [168] above, the central question is not whether less restrictive measures could have been adopted, or whether the state can prove that its legitimate aim would not be achieved without its selected measure but whether in adopting its measure and striking the balance it did, the legislature acted within the margin of appreciation allowed to it. Adopting the language used in James, [51], the issue for this court is whether adopting a Ground Rent Cap of 0.1%, as opposed to, say, 0.25%, “could be regarded as reasonable and suited to achieving the legitimate aim being pursued, having regard to the need to strike a 'fair balance'.” That issue turns on the extent to which it was reasonable to conclude that a cap of 0.1% struck a fair balance between the interests of the tenant and landlord, which in turn raised the issue of the potential for ground rents in excess of 0.1% to adversely affect a tenant’s ability to sell or mortgage their property. We address the material which formed the basis of a 0.1% cap in the “fair balance” section below. We are satisfied, on the basis of that material, that it was reasonable to conclude that a Ground Rent Cap set at 0.1% struck a fair balance between the interests of tenants and landlords, and that a cap at that level was reasonable and suited to the objects of addressing the inherent unfairness so far as tenants are concerned in the leasehold form of property ownership. In particular, it is reasonable to conclude that setting a cap of 0.1% reflected a level of ground rent which would avoid realistic adverse effects on the saleability and mortgageability of leasehold property, and was “fair” for that reason. By contrast, a higher cap would have inhibited the ability of tenants paying ground rents adversely affecting the saleability and mortgageability of their property to address the problem by enfranchising.

Finally, we should address a point made by Mr Maurici that the object of making enfranchisement cheaper and easier for tenants could have been achieved without affecting the amount payable to landlords if the tenants’ enfranchisement costs had been subsidised from government funds. Mr Maurici cited the decision of the ECtHR in Radovici v Romania. However, this suggestion fails to grapple with what we have identified to be a key object of the LFRA 2024 – to address the inherent unfairness in leasehold as a property ownership model and the imbalance in the leasehold relationship between tenants and landlords. Using central funds to preserve the benefits of that unfairness so far as landlords are concerned would not remedy it. The financial effects of the LFRA 2024 in addressing this issue impact (and solely impact) landlords because it is landlords who benefit from the criticised aspects of the leasehold relationship. As with the Consumer Credit Act 1974 provisions in issue in Wilson, the impugned features of the LFRA 2024 exclusively operate as between parties to an existing legal relationship and relate to the financial aspects of that relationship. Further, as Lord Reed noted in AXA at [130] (see [170] above], “the fact that a publicly-funded scheme would avoid any burden being placed on [landlords]” does not “entail that a scheme which imposes such a burden is disproportionate”.

In summary, we conclude that in choosing to address its legitimate objects through the Ground Rent Cap Parliament did not exceed its margin of appreciation.