SGL 1 Limited v FSV Freeholders Limited

For Part I of the Landlord and Tenant Act 1987, “building” does not extend to a “building scheme” merely because separate structures form one development. Section 5(3) requires a landlord proposing a transaction involving more than one building to sever it so that each building is dealt with separately.

In limited circumstances, more than one structure may nevertheless form one building. The central question is whether the structures lie within a functionally integrated built envelope. The landlord chooses the interest to be disposed of and how severance is arranged, subject to that requirement. Existing easements and appurtenant rights remain protected.

Block A was separate, while Blocks B, C and E formed one building. The notices were valid and the appeal was allowed.

Fox Street Village comprised five residential blocks. The administrators of the landlord served separate section 5 offer notices for Block A and for Blocks B, C and E, then sold the development to SGL1 Limited. The qualifying tenants subsequently served notices seeking to acquire the freehold reversion.

The District Judge initially declared that the statutory requirements had been met. Fancourt J restored the issue whether the blocks constituted one or more buildings. HHJ Hodge KC dismissed SGL1’s application, holding that the four blocks formed one building and that the notices were invalid: [2025] EWHC 3 (Ch).

The central issue on appeal was the meaning of “building” in Part I of the Landlord and Tenant Act 1987 and the resulting validity of the notices.

The appeal was unanimously allowed. The section 5 notices served for Block A and for Blocks B, C and E were valid.

1. Construction of section 5(3). The Court rejected the proposition that “building” includes a building scheme merely because separate structures were developed together. The statutory wording requires a transaction involving more than one building to be severed so that each building is dealt with separately.
2. Landlord’s initiative. The landlord decides which estate or interest to dispose of. Section 5(3) applies only where the proposed transaction involves more than one building. It does not prescribe how shared amenity land must be allocated, provided each building is dealt with separately. Existing easements, demised areas and quasi-easements remain effective after severance.
3. Meaning of building. A single test is difficult to formulate, but the central question is whether structures fall within a functionally integrated built envelope. A lengthy multi-factor evaluation is generally unnecessary. The Court held that Long Acre Securities Ltd v Karet was wrongly decided to the extent that it treated separate structures sharing appurtenant premises as one building.
4. Application. Block A was a separate warehouse conversion with its own services and utilities. Blocks C and E shared an entrance, stairwell, plant room and utilities, and formed one building. Block B could not function independently without substantial new works and was therefore part of the same building as Blocks C and E.
5. The judge below had applied the wrong legal test. The Court was therefore entitled to interfere with his evaluative conclusion. The notices were valid and the appeal was allowed.

• Court of Appeal (Civil Division): Allowed SGL1’s appeal and held that Block A was one building and Blocks B, C and E another.
• High Court (Chancery Division): HHJ Hodge KC dismissed SGL1’s application, holding that Blocks A, B, C and E formed one building and that the notices were invalid: [2025] EWHC 3 (Ch).
• High Court: Fancourt J partly allowed an appeal from the District Judge’s order and restored the issues concerning the meaning of “building” and notice validity.
• District Judge: Declared that the landlord had complied with section 5 of the Landlord and Tenant Act 1987.