SGL 1 Limited (Respondent) v FSV Freeholders Limited (Appellant)

Permission to Appeal granted

Case summary
Permission to Appeal
Previous proceedings
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Case summary

Case ID

UKSC/2026/0052

Parties

Appellant(s)

FSV Freeholders Limited

Respondent(s)

SGL 1 Limited

Issue

The Landlord and Tenant Act 1987 regulates the circumstances in which the freeholder of a residential building may sell their freehold to a third party. The Act gives a buildings’ leaseholders the right to purchaase the building’s freehold by matching any purchase price the freeholder agrees with a third party. S. 5(3) of the Act states that, where a freeholder proposes to sell the freehold of more than one building at the same time, each building’s leaseholders must separately be given the opportunity to purchase their building’s leasehold. What does s. 5(3) mean by a ‘building’?

Facts

Fox Street Village is a housing development in Liverpool. It consists of five blocks. Block A is a converted warehouse. Blocks B, C and E are very similar modern tower blocks. These three tower blocks share a single plant room which provides electricity, gas, and water to all three blocks. Blocks C and E are connected and share a single entrance. The final block, Block D, was never completed and burnt down in 2024. All the blocks share common paths and parking areas. In 2021, the development’s freeholder Fox Street Village Limited became insolvent. The company’s administrators agreed to sell the freehold to SGL 1 Limited, the respondent to this appeal. The sale of residential buildings’ freeholds is regulated by the Landlord and Tenant Act 1987. In summary, leaseholders have a ‘right of pre-emption’. Before selling the freehold to a third party, a freeholder must serve a notice on the buildings’ leaseholders stating the terms of the proposed sale. The leaseholders are then granted an opportunity to collectively purchase the building’s freehold for the price stated and manage it themselves. The freeholder served notices stating the terms of the proposed sale on the Fox Street Village leaseholders. On receipt of the notice, one of the Fox Street Village leaseholders incorporated the appellant, FSV Freeholders Ltd, as a vehicle for purchasing the freeholds. However, the majority of leaseholders did not wish to purchase the buildings’ freeholds at the price offered. The freehold was therefore instead sold to the respondent. After completing the purchase, the respondent filed a claim under Part 8 of the CPR seeking a declaration that the transaction complied with the 1987 Act’s process. The appellant contested this application, arguing the transaction did not comply with the process and was therefore invalid. One of the appellant’s arguments concerned the meaning of the word ‘building’ in s.5(3) of the 1987 Act. S. 5(3) states that: ‘Where a landlord proposes to effect a transaction involving the disposal of an estate or interest in more than one building (whether or not involving the same estate or interest), he shall, for the purpose of complying with this section, sever the transaction so as to deal with each building separately’. The 1987 Act does not provide any definition the word ‘building’. The position of distinct but closely integrated structures is therefore ambiguous. For example, do the three tower blocks, Blocks B, C, and E collectively constitute a single building for the purposes of the 1987 Act? Or is each of them a separate building? The original freeholder took the view that blocks B, C, and E were so interconnected as to constitute a single ‘building’ within the meaning of s.5(3). However, conversely the freeholder believed Block A, the converted warehouse, was a separate building. It therefore served two separate notices. It served one notice on the Block B, Block C, and Block E leaseholders offering them the opportunity to purchase the freehold of those three blocks. It served a second notice on the Block A leaseholders offering them the opportunity to purchase the freehold of Block A. The appellant argues that this was an error. It submits that the four inhabited blocks are a single ‘building’ for the purposes of the 1987 Act. It is said that the freeholder should therefore have served all the developments’ leaseholders with a single notice offering them the opportunity to purchase a single freehold covering all four inhabited blocks. In the alternative, the appellant submits that each of the four blocks is its own ‘building’ for the purposes of the 1987 Act. It is said that the freeholder should have served four separate notices on each block’s leaseholders offering them the opportunity to purchase the freehold of their specific block. The appellant submits that, in either case, the 1987 Act’s process was not followed and therefore the freehold’s sale was invalid. The High Court accepted that the development constituted a single ‘building’ and held the transfer of the freehold to have been invalid. The Court of Appeal overturned this conclusion on appeal. It agreed with the freeholder that for the purposes of the 1987 Act, Block A was one ‘building’ and Block B, C, E were collectively a second ‘building’. It held that the transfer had therefore been valid.