FSV Freeholders Limited v SGL 1 Limited

Where a proposed disposal involves more than one building, section 5(3) of the Landlord and Tenant Act 1987 requires the transaction to be severed for the purpose of the offer notices. Each notice must state the principal terms of the disposal relating to the particular building, including its attributable consideration and any required deposit.

The notices need not state the global price or other terms of the sale of the entire site, nor information about a building outside Part 1. A condition precedent that is merely completion machinery is not a principal term. The provisions must be construed as a coherent scheme, with the offer capable of acceptance by the qualifying tenants.

Administrators of Fox Street Village Limited served two sets of offer notices under sections 5 and 5A of the Landlord and Tenant Act 1987, one concerning Block A and the other concerning Blocks B, C and E. The freehold was later sold to SGL 1 Limited as part of a transaction covering those blocks and Block D, which was outside Part 1 of the Act.

District Judge Lampkin declared that the statutory requirements had been complied with. On appeal, Fancourt J allowed the appeal in part, set aside that order and restored the claim for determination of the building issue and notice validity: [2022] EWHC 3336 (Ch). The Court of Appeal proceeded on the assumption that Block A and Blocks B, C and E were separate buildings. The central issue was whether the notices had to state the terms of the entire-site transaction, including its global price, deposit and court-order condition.

Appeal dismissed. Lady Justice Asplin gave the leading judgment. Lord Justice Arnold and Lord Justice Peter Jackson agreed, making the decision unanimous.

1. The court applied the contextual approach to statutory interpretation summarised by Lord Hodge in R (O) v Secretary of State for the Home Department; R (Project for the Registration of Children as British Citizens) v Secretary of State for the Home Department [2022] UKSC 3. The words must be read in the context of the section, the relevant group of provisions and the Act as a whole. There was no need to resort to linguistic presumptions because the statutory context and ordinary meaning resolved the issue.
2. Section 5(1) requires an offer notice where the landlord proposes a relevant disposal. Section 5(2) incorporates the applicable requirements in sections 5A to 5E into section 5. The notice must be capable of acceptance by the requisite majority of qualifying tenants.
3. Section 5(3) is mandatory. Where the proposed transaction involves disposing of an estate or interest in more than one building, the transaction must be severed, for the purpose of complying with section 5, so as to deal with each building separately. The requirements of sections 5A to 5E must therefore be read in that light.
4. Where section 5(3) applies, “the property” in section 5A(2)(a) means the particular building, and “the contract” in section 5A(2)(b) means the contract relating to that building. The notice must state the principal terms of that severed disposal, including the relevant consideration and deposit. It need not state the global price or other principal terms of the contract for the entire site. Requiring disclosure of the overall transaction would undermine the purpose of severance and would give tenants only an unhelpful headline price. There was no requirement to provide details of Block D, which was outside Part 1.
5. The alternative argument also failed. The condition requiring a Sealed Court Order was not a principal term of the sale contract. It was machinery for completion. Even on the appellant’s construction, its omission would not have invalidated the notices. This was an alternative finding expressed in any event.
6. On the assumed building classification, the notices were valid in the respects challenged. The appeal was dismissed.

1. Court of Appeal (Civil Division): Dismissed the appeal on 14 November 2023.
2. High Court of Justice, Business and Property Courts in Liverpool, Chancery Appeals (ChD): Fancourt J allowed the appeal in part, set aside District Judge Lampkin’s order, and restored the claim for determination of the building classification and notice validity: [2022] EWHC 3336 (Ch).
3. District Judge Lampkin: By order dated 11 January 2022, declared that the statutory requirements had been complied with and made a costs order against the appellant and other defendants.