SGL1 Ltd v FSV Freeholders Ltd
In a judgment handed down on 13th March 2026 in the case of SGL1 Ltd v FSV Freeholders Ltd [2026] EWCA Civ 267, John de Waal KC and Gemma de Cordova have overturned long-established authority on the question of what is a ‘building’ for the purposes of a notice served under section 5 of the Landlord and Tenant Act 1987.
The decision is important reading for those concerned with transactions involving residential leasehold property where Part I of the 1987 Act may apply.
Part I of the Act is concerned with tenants’ right of first refusal: when disposing of the freehold of flats held under long leases the landlord must first offer the premises on the same terms to the tenants.
As long ago as February 2020 the landlord of Blocks A-E Fox Street, Liverpool had served two section 5 notice on the tenants, one for block A and the other for blocks B, C and E which were interlinked (block D had been demolished).
Section 5(3) of the Act provides 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 tenants argued, successfully, at trial that the transaction should not have been severed because the blocks on the estate was constituted one ‘building’ not two.
The judge held that this was correct on the authority of Long Acre Securities v Karet [2004] EWHC 442 (Ch), a decision of deputy judge Geoffrey Vos QC (now better known as the Master of the Rolls).
The Court of Appeal (Lewison, Asplin, Arnold LJJ) has now held that Karet was wrongly decided and that (para 83) that whilst it was difficult to formulate a single test to answer the question whether a structure was a ‘building’:
“The central question is likely to be whether the structures are within a functionally integrated built envelope”.
The Court accepted John and Gemma’s submission (para 63) that a “building” is a single structure with the proviso that where, in practice, it is indivisible from another structure, or physical division is impossible, the structures are one building.
Thus, overturning the trial judge’s decision on the facts, blocks B, C and E were one building and A another. Thus the notices served by the landlord were valid.
A copy of the judgment can be found here: SGL1 Ltd v FSV Freeholders Ltd [2026] EWCA Civ 267.
John and Gemma were instructed by Mark Forman and David Tartellin of MSB Solicitors in Liverpool.
John and Gemma will be discussing the judgment and its implications for practitioners at a Gatehouse online ‘Brew’ at 12.45pm on Monday 16th March.
