[2025] EWHC 2751 (Admin)

As we have said in our earlier section dealing with legal principles, the central question is not whether less intrusive measures could have been adopted, or whether the state can prove that its legitimate aim could not have been achieved without its chosen measure. Rather, it is whether in adopting its measure and striking the balance it did, the legislature acted within its margin of appreciation.

First, the claimants suggested that the benefit of the Marriage Value Reform should have been restricted to certain classes of leaseholds (see the examples in other legislation set out in para.86 of Mr. Jourdan’s skeleton), in particular owner-occupiers or persons unable to afford levels of compensation under the pre-existing code, or to exclude commercial investors. However, as we have explained, the aim of the Reform was to remedy the systemic imbalance and unfairness in the relationship between all landlords and all tenants resulting from the wasting asset problem. The claimants’ suggestions would not achieve the aim of the legislation.

Alternatively, it has been suggested that “differential pricing” of the compensation payable to landlords could distinguish between more and less deserving tenants. This technique would mean that tenants judged to be less deserving would benefit from a reduction in the amount of marriage value payable, rather than a complete exclusion of marriage value. By definition that would not achieve the aim of removing the whole of the imbalance attributable to the wasting asset problem in all cases.

Accordingly, these two alternatives do not qualify as relevant “less intrusive measures” since they would not achieve fundamental aims of the reform.

Further, these alternatives both depend upon an ability to define distinct categories in legislation which would work satisfactorily in practice. These issues were considered carefully by the Law Commission in its Valuation Report. It accepted that it would not be impossible to draw up legislation to define categories of tenants for different treatment. But the Law Commission concluded that there would be difficulties: for example, in defining and justifying the distinctions, anomalies, distortions in the market (including effects on marketability) and unintended consequences.

The briefing to Ministers and the IA took the same approach. It was decided that the Marriage Value Reform should apply across the board. We consider that that decision lay well within the legislature’s margin of appreciation.

The wasting asset problem may be thought to be particularly acute for resident occupiers, but even so tenants falling within that category come in all shapes and sizes. The problem is also severe for small investors who invest in dwellings, for example, for their retirement. Could a category of small investors be satisfactorily defined: by reference to the number of properties held (1, 2, 5, …) or by reference to total capital value? If the reforms had been made to apply to only certain categories of tenant, their landlords would complain that they would suffer a loss in value, but not other landlords with potential knock-on effects in the market for freehold or leasehold property dependent on the attributes of the current or a prospective tenant. Tenants who did not benefit from the reforms would also complain about their differential treatment. There is no escaping the simple point that the wasting asset problem applies to all leaseholds falling within the enfranchisement code and thus to all landlords and tenants in relation to those leaseholds.

A further justification, although not a central one, for the Marriage Value Reform was the complexity of the valuation process for determining that value, in particular the need to apply a relativity factor (used to arrive at a value of the leasehold without the benefit of a right to enfranchise). The Lands Tribunal and its successor the Lands Chamber have been troubled by this subject on many occasions over the years, but there is no need for us to delve into its technicalities. Mr. Jourdan submitted that one solution would be for the defendant to make a statutory instrument prescribing the relativity to be used in assessments of marriage value. This, too, the Law Commission considered in its reports with care and at some length. They referred to the arbitrariness of making a deduction for the benefit of an enfranchisement right given the paucity and age of the evidence available (e.g. para.14.61 of the Consultation Paper). Plainly, the prescription of relativity rates would simplify the process for valuing marriage value in each claim, but the lack of evidence would still affect the determination of prescribed values. However, even assuming prescription to be feasible, that would not enable the central aims justifying the removal of marriage value from enfranchisement compensation to be achieved.

Mr. Maurici submitted that the Government and Parliament failed to consider introducing a “grandfathering clause” in relation to the Marriage Value Reform, or to give reasons for not pursuing that alternative. Mr. Moules KC produced a note showing that the matter was debated twice in the House of Lords. On one occasion the relevant amendment was not moved and on the other it was withdrawn. On the first occasion, Baroness Scott (Parliamentary Under Secretary of State at the Department of Levelling Up, Housing and Communities) observed that the amendments were “directly counter to our objective. In particular, they would prevent us from helping the trapped leaseholder – that is a leaseholder with a short lease who is unable to afford to extend because of the prohibitive marriage value payable, and so is trapped with an asset of diminishing value” and “would also further complicate an already complex system”, creating “a new two-tier system with different rules for leases that were under 80 years at the time of the Act and those that fell under 80 years thereafter” (HL Deb 24 April 2024, Vol 837 cols.501-502). On the second occasion, Lord Gascoigne, speaking for the Government stated that “these amendments would leave some leaseholders with wasting assets from which there is no escape” (HL Deb 24 May 2024 Vol 838 cols.1336-1344). In the light of this Parliamentary consideration, this issue was not pursued further before us.

We deal with the suggestion that an exception should have been made to exclude charities from the Marriage Value Reform and the two other measures in the LFRA 2024 under Issue 14 below.