ARC Time Freehold Income Authorised Fund, A Sub-fund of ARC Time Funds, Acting through its Authorised Corporate Director, Alpha Real Capital LLP & Others v The Secretary of State for Housing, Communities and Local Government

Hearing dates: 15, 16, 17 and 18 July 2025

Further written submissions: 9 August 2025

Approved Judgment

This judgment was handed down remotely at 10.30am on 24 October 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Lord Justice Holgate and

Introduction

This judgment is set out under the following headings:

The claimants, who are owners of freehold and other reversionary interests of dwellings, and to whom we shall refer as “landlords” 1, ask the court to declare that amendments made by the Leasehold and Freehold Reform Act 2024 (“LFRA 2024”) to legislation for determining the sums a landlord will receive when a tenant under a long lease exercises a statutory right to enfranchise are incompatible with Article 1 of the First Protocol (“A1P1”) to the European Convention of Human Rights (“ECHR”). A1P1 provides:

“ Protection of property

Article 1

Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general

interest or to secure the payment of taxes or other contributions or penalties.”

In this introduction we outline the regime which was amended by the LFRA 2024. It is also necessary to refer to a previous A1P1 challenge and its outcome, because the issues in that litigation and the manner in which they were resolved remain highly relevant to these challenges to the latest chapter in the reform of that regime.

The Leasehold Reform Act 1967 (“ LRA 1967”) conferred on tenants a right to enfranchise low value houses (i.e. houses where the rateable value was below a ceiling and where the rent was less than two thirds of the rateable value) held on a “long tenancy” (i.e. a term exceeding 21 years) and occupied as the tenant's residence. A tenant became entitled to acquire the freehold reversion or a single 50 year extension to his lease on terms which the legislation described as “fair”. The LRA 1967 obliged the landlord to make the necessary grant.

Part of the rationale for the legislation was set out in the White Paper “Leasehold Reform in England and Wales” (Cmnd. 2916 – February 1966) (“the 1966 White Paper”). It was said to be unjust that at the end of the term ownership of the land and the house should revert to the freehold reversioner, together with any improvements made by the tenant or his predecessors, without the landlord paying anything to the tenant. Irrespective of whether the tenant had constructed the house under a building lease arrangement, he and his successors would have borne the costs of maintaining the property throughout the term, together with the costs of any improvements. The 1966 White Paper stated that such a tenant was morally entitled to the ownership of the building.

Consequently the LRA 1967 proceeded on the basis that “in equity” the land belonged to the landlord and the building to the tenant (para. 4 of the 1966 White Paper). Here the word “equity” expressed the legislature's view as to what would be fair as between the parties, not a property law concept. So the LRA 1967 laid down a valuation formula so that the landlord would receive a purchase price based on the value of the land, subject to the tenant's lease, but disregarding the value of the house situated on it.

The creation of a right to enfranchise was also intended to address other injustices faced by tenants because of the nature of a long lease as a wasting asset. Notwithstanding the substantial premium paid for the...