Court of Appeal Clarifies Disposal Rights in Multi-Building Estates Under Landlord and Tenant Act 1987

Citation: [2023] EWCA Civ 1318
Judgment on

Introduction

In the case of ‘FSV Freeholders Limited v SGL 1 Limited’, the Court of Appeal delved into the nuances of the Landlord and Tenant Act 1987 (LTA 1987), particularly focusing on sections 5, 5A, and 5(3) and their application in scenarios where the disposal of an estate involves more than one building. The court analyzed whether the offer notices served by the administrators of Fox Street Village Limited (FSV Ltd) upon qualifying tenants complied with the aforementioned statutory provisions. This case stands as a pivotal point for interpreting the rights of first refusal afforded to qualifying tenants when a freehold property comprising multiple buildings is being disposed of.

Key Facts

The administrators of FSV Ltd served two sets of offer notices to qualifying tenants concerning the proposed disposal of the freehold titles of various blocks of Fox Street Village. The tenant’s rights of first refusal were invoked per LTA 1987. There were inherent complications due to the property comprising multiple buildings and the notices’ failure to state the total contractual price of the entire property.

Initial proceedings led to a declaration by District Judge Lampkin that the freehold owners complied with the LTA 1987 provisions upon disposal. However, this was partly overturned by Fancourt J, leading to the subsequent appeal.

The core legal principles revolved around the interpretation of the LTA 1987:

  1. Section 5 Compliance: Section 5 LTA 1987 mandates that landlords must serve offer notices to qualifying tenants before making a relevant disposal of premises. This notice serves as an offer that can be accepted by the tenants, granting them a right of first refusal. It must comply with further specified requirements under sections 5A-D, relevant to the form of the proposed disposal.

  2. Severance of Transaction (Section 5(3)): Section 5(3) LTA 1987 arises when a landlord proposes a transaction involving the disposal of estates or interests in more than one building. This provision requires the landlord to sever the transaction, treating each building separately for the purposes of serving offer notices.

  3. Offer Notice Requirements (Section 5A): Section 5A sets out the detailed requirements for offer notices, stating they must include particulars of the principal terms of the proposed disposal including, but not limited to, the property, the estate or interest, other contractual terms, and price.

Outcomes

The key outcome from the appeal concerned the interpretation of section 5(3) and related provisions. The Court of Appeal concluded that:

  • The severance requirement of section 5(3) is a mandatory step in serving offer notices where multiple buildings are concerned.
  • Offer notices under section 5, read with 5A and the mandatory severance requirement of section 5(3), must specifically relate to the individual building that is being offered to the tenants for purchase.
  • Offer notices need not detail the global price of the entire property or terms related to buildings that are not subject to Part 1 of the LTA 1987.
  • Particulars of the transaction should be broken down to provide tenants with information pertaining exclusively to their building, allowing them to effectively exercise their rights of first refusal.
  • The requirements of sections 5 and 5A should be interpreted as being affected by section 5(3) when the property involved is made up of multiple buildings.

The appeal was dismissed on these grounds, affirming the lower court’s decision after the partial allowance of the appeal by Fancourt J.

Conclusion

The ‘FSV Freeholders Limited v SGL 1 Limited’ case underscores the intricate balance between a landlord’s disposal rights and the qualifying tenants’ right of first refusal under LTA 1987. It clarifies that when multiple buildings are involved in a disposal, each building must be treated separately in offer notices, ensuring transparency and fairness in upholding tenants’ rights. The Court of Appeal decisively interpreted statutory requirements, reinforcing the necessity for landlords to comply with precise statutory provisions when engaging in disposals that affect qualifying tenants. This case serves as essential reading for legal professionals navigating property rights and disposals in the context of multi-building freehold properties within the United Kingdom.