https://leaselaw.co.uk/wp-content/uploads/2023/11/AdobeStock_285834384-scaled-e1692103764795-1375x1536-1.jpg
A recent Court of Appeal case, SGL 1 Ltd v FSV Freeholders Ltd, has clarified an important point for landlords and tenants, when a property looks like one development, it may not legally count as a single “building”.
In this case, the landlord planned to sell a residential development made up of four blocks (Blocks A, B, C and E). Instead of treating the whole site as one unit, the freeholder split the sale into two parts, Block A as one and Blocks B, C and E as the other.
The freeholder then served separate Section 5 notices on the tenants, as required under the Landlord and Tenant Act 1987.
The tenants disagreed with the landlord’s approach. They argued that all four blocks formed a single building, meaning they should have been offered the chance to buy the entire development together.
The Court of Appeal sided with the landlord. It ruled that Block A was a separate building because it had its own services and could function independently. Blocks B, C and E were one building because they relied on each other and couldn’t operate separately without major work. So the freeholder was correct to split the transaction and serve two separate notices.
The case is important because under the legislation, tenants often have a right of first refusal when landlords want to sell their freehold interest. However, this right applies per building, not necessarily per development. This case makes it clear that just because buildings are close together, or share access roads for example, it doesn’t automatically make the buildings one single unit. The key question is whether the structures are functionally independent.
The court also confirmed that landlords have some flexibility in how they structure a sale, especially when it comes to shared areas such a access roads or parking, as long as they follow the correct notice procedure.
This decision gives landlords more clarity (and more control) when selling multi-block developments. For tenants, it’s a reminder that their rights depend heavily on how a “building” is defined in practice, not just how it looks on the ground.
How We Can Assist
We have had the privilege of working extensively on section 5 right of first refusal claims for both Landlords and Tenants for many years. Our dedicated team combines deep legal expertise with practical experience to provide comprehensive support in these areas.
If you require any assistance relating to section 5 right of first refusal matters, we would be delighted to assist you. Please do not hesitate to contact Sajel Patel on sajel@leaselaw.co.uk/0204 511 9103 to discuss your proposed matter.
