Leasehold reform latest: Court of Appeal challenge and new consultations

There have been three important developments over the summer of 2026 for leaseholders following the Leasehold and Freehold Reform Act 2024 (LAFRA 2024), which many leaseholders await concrete news on.

The freeholders’ judicial review challenge is now proceeding to the Court of Appeal, while the government has opened consultations on enfranchisement process costs and the valuation rates that would be used under the new system.

These are significant steps, but they have not yet changed the law governing the premium and costs payable in current statutory lease extension and freehold purchase claims. Flat owners can also be forgiven for becoming frustrated with yet more consultations rather than action in the form of reduced lease premiums or associated costs.

1. The LAFRA judicial review appeal

In October 2025, the High Court dismissed a judicial review brought by several groups of freeholders against key parts of LAFRA 2024.

The challenge concerned three of the most important enfranchisement reforms:

•     the proposed abolition of marriage value;

•     the proposed 0.1% cap on ground rent used when calculating an enfranchisement premium; and

•     the general removal of a leaseholder’s liability for the freeholder’s legal and valuation costs.

The High Court decided that the reforms were compatible with the freeholders’ property rights under Article 1 of the First Protocol to the European Convention on Human Rights. The Court of Appeal has since granted permission to appeal after this was sought by part of the wealthy freeholder group.

Reports have described the appeal as having been fixed for April 2027 to be heard over four and a half days, which indicates a good amount of time has been set aside to deal with the issues and that perhaps things will be resolved once and for all.

This is not presently a Supreme Court appeal. A further appeal to the Supreme Court could potentially follow the Court of Appeal’s decision, which could delay the reforms further.

The government has said that it will continue implementing LAFRA 2024 while defending the appeal. However, the case adds further uncertainty to the timing of the valuation and costs reforms challenged by the freeholders, and given the carousel of housing ministers, it seems that there are a number of reasons why things will remain on the slow track. For the time being, the procedure remains more or less as it has been for years, as set out in our lease extension guidance note.

You can read the High Court judgment and the government’s summary of the appeal in its process costs consultation.

2. The consultation on leasehold enfranchisement process costs

Under the present statutory system, leaseholders will usually pay their own professional costs and the freeholder’s reasonable legal and valuation costs when extending a lease or buying the freehold.

LAFRA 2024 provides for a different general rule under which each party would pay its own non-litigation costs, described by the Government as “process costs”. That new rule is not yet in force for lease extensions or enfranchisement claims.

The Government is now consulting on the limited exceptions under which a leaseholder could still be required to contribute towards the freeholder’s process costs. These include:

•     low value claims;

•     claims which fail because of an act or omission by the leaseholder;

•     leasebacks required as part of a collective enfranchisement claim; and

•     a proposed additional exception for certain third parties, such as some resident-led management organisations, where being unable to recover costs could put them at risk of insolvency.

For low value lease extensions and claims to buy the freehold of a leasehold house, the consultation uses a proposed prescribed amount of £1,500, excluding VAT and disbursements. This does not mean that every affected leaseholder would simply pay an additional £1,500. The proposed calculation takes account of the premium and the lower of the freeholder’s reasonable costs and the prescribed amount.

For collective enfranchisement, the suggested prescribed amount is £1,500 plus £250 for each participating unit after the first. The consultation also proposes £750 for a ground rent buyout and separate amounts for failed claims and leasebacks.

These are consultation proposals, not settled figures. The consultation closes on 23 September 2026.

You can read and respond to the leasehold enfranchisement process costs consultation.

3. The consultation on leasehold enfranchisement valuation rates

The second consultation concerns the deferment and capitalisation rates that would be prescribed under the new Standard Valuation Method in LAFRA 2024, which willl be akin to the online lease extension calculators that are already wisely used in simpler cases.

These rates are technical, but they have a direct effect on the premium:

•     the capitalisation rate is used to calculate the present value of the freeholder’s future ground rent income; and

•     the deferment rate is used to calculate the present value of the freeholder receiving the property back at the end of the lease.

Broadly, a lower rate produces a higher present value, while a higher rate produces a lower present value. The rates eventually selected could therefore have a substantial effect on lease extension and freehold purchase premiums.

For deferment rates, the Government is considering whether to retain the rates established by the Sportelli decision, currently 4.75% for houses and 5% for flats, update the Sportelli approach, or adopt an alternative method.

For capitalisation rates, the options include one rate for all relevant ground rents, three rates depending on the rent review structure, or an alternative approach. The consultation indicates that the prescribed rates may remain in use for up to 10 years and would not vary by geographical region.

The Government says the purpose of prescribing rates is to provide greater certainty and reduce valuation disputes. It also says that the rates should reflect the present value of the relevant income and reversion, rather than being selected simply to reduce premiums further. We would add that the simplification of the valuation process should reduce valuation fees along with reducing the amount of time it takes valuers to agree on the premim.

The valuation rates consultation also closes on 23 September 2026.

You can read and respond to the leasehold enfranchisement valuation rates consultation.

Ricky Coleman’s view

“These consultations are continued progress, but they are not the same as the reforms coming into force, and the pace of real change that will reduce leaseholders' costs remains painfully slow.

The LAFRA appeal means the timetable remains uncertain. Leaseholders should be cautious about putting off a lease extension solely because they expect the new system to be cheaper, especially if their lease term has more than 80 years.”

Ricky Coleman, Solicitor and founder of Peppercorn Law

What does this mean for leaseholders now?

The existing law continues to apply. Marriage value remains part of the current statutory calculation where a lease has 80 years or fewer remaining, and leaseholders remain liable for the freeholder’s reasonable legal and valuation costs in a statutory claim (for which there is no set figure and freeholders costs vary significantly depending on the firm of solicitors used).

The two consultations are evidence that the Government is working through the detail needed to implement elements of LAFRA 2024. However, the consultation responses must be considered, secondary legislation will be needed, amendments to the 2024 Act are expected, and the Court of Appeal has yet to decide the freeholders’ challenge being heard in 2027.

There is therefore still no firm date for the main valuation and costs reforms to take effect.

Whether it is sensible to extend now or wait will depend on the length and terms of the lease, the leaseholder’s plans to sell or remortgage, the likely premium under the current law and their appetite for uncertainty and the risk of premiums possibly increasing in some instances. A leaseholder approaching the 80-year point should take particular care before delaying as marraige value can double the premium payable to the freeholder, overnight.

If you are considering a lease extension or freehold purchase, Peppercorn Law offers leaseholder focused fixed legal fees and has years of assisting in all manner of leasehold cases.