It is a major blow for Sir Keir Starmer, who has made housing reform a central pillar of Labour’s appeal to voters.
LAFRA was introduced under the previous Conservative government and became law in May 2024, but the bulk of the measures have yet to be implemented.
A series of legal challenges has helped delay the full rollout of the reforms.
Freeholders launched a legal challenge against the Government last summer over claims that the reforms breached European human rights law and would leave them millions of pounds worse off.
The consortium of six landowners – including Cadogan Estates and Grosvenor Group – argued that the changes amounted to a form of compulsory purchase and that compensation payable was no longer adequate.
The Government had estimated the total impact of the policy on landlords at around £4bn.
By 2028, ministers plan to replace leasehold with commonhold, a system under which flat owners own their flats outright and manage their buildings collectively, removing the role of landlords entirely.
The universal £250 cap on ground rent had also been expected to come into force in late 2028, subject to parliamentary timings.