SGL 1 Limited v FSV Freeholders Limited & Ors

For the purposes of tenants’ rights of first refusal, “building” may include more than one physically separate structure where the qualifying tenants share appurtenant premises or access arrangements. The question is fact-sensitive and requires a multi-factorial assessment. Relevant considerations include physical layout, structural connections, leaseholders’ rights over appurtenant premises, access, services, shared facilities, management, service charges, planning history and regulatory requirements. The factors must be weighed together, with particular circumstances capable of exerting decisive weight. Where a transaction concerns more than one building, Landlord and Tenant Act 1987, section 5(3) requires separate treatment. Notices served on the basis of separate buildings are invalid if the structures properly constitute one building for the statutory purpose.

The claimant acquired the freehold interests in four residential blocks forming part of Fox Street Village. The administrators had served one offer notice for Block A and another for Blocks B, C and E under sections 5 and 5A of the Landlord and Tenant Act 1987. Earlier proceedings established that the notices’ contractual terms were sufficient, but directed a trial of whether the blocks constituted one, two or more buildings for Part 1 of the Act.

The issue was whether the blocks’ physical separation, shared services, communal areas, access arrangements and leaseholders’ rights over appurtenant premises required one or more notices. The claimant sought a declaration that the statutory requirements had been met.

1. The claim for declaratory relief was dismissed. The two section 5 offer notices were invalid because Blocks A, B, C and E constituted a single “building” for Part 1 of the Landlord and Tenant Act 1987.

2. The court was bound to follow Long Acre Securities Ltd v Karet [2004] EWHC 442 (Ch), [2005] Ch 61, despite concerns about its construction of the mandatory severance requirement in section 5(3). The decision had stood for over 20 years and neither party had advanced argument challenging it.

3. Whether separate structures constitute one building is a multi-factorial evaluation. Relevant factors include plans; structural support; lessees’ rights to appurtenant premises; physical connections; construction dates; management; service charges; visual impression; access; servicing; shared facilities and amenities; planning history and enforcement; and housing, building and other regulatory requirements. The list is non-exhaustive, and factors may point in different directions.

4. Appurtenances comprise physical areas of land rather than incorporeal rights. The court found no inconsistency between FirstPort Property Services Ltd v Settlers Court RTM Company Ltd [2022] UKSC 1, [2022] 1 WLR 519 and York House (Chelsea) Ltd v Thompson [2019] EWHC 2203 (Ch), [2020] Ch 1.

5. The decisive consideration was the shared use of Back Beau Street. It provided access to communal areas and to car parking spaces demised to some Block A leaseholders but situated outside Blocks C and E, and possibly Block B. That factor, considered with the other evidence, outweighed the physical separation and other countervailing features.

The parties were invited to agree consequential orders, including costs. The time for appealing was extended to 42 days.

• High Court: District Judge Lampkin initially granted declaratory relief, holding that the statutory requirements had been complied with.
• High Court (Chancery Division): Fancourt J set aside that decision and directed a trial of the building and notice-validity issues in [2022] EWHC 3336 (Ch).
• Court of Appeal: The appeal was dismissed in [2023] EWCA Civ 1318. The court upheld the conclusion that the notices did not need to state the terms of the disposal of the entire site.
• Supreme Court: Permission to appeal was refused, as recorded at [2024] 1 WLR 2433.
• High Court: The present trial determined the remaining issue and dismissed the claim.