Section 5(3) of The Landlord and Tenant Act 1987 (“the Act”) mandates that before a landlord may dispose of their freehold interest they must first serve notice to qualifying tenants which, amongst other things, details the terms of the proposed sale. This rule applies to most freehold interests where they contain two or more flats owned by qualifying tenants, though there are some exceptions.
Importantly, if the sale of the freehold involves more than one building containing qualifying tenants, the Act requires the landlord to deal with each building separately for the purposes of Section 5, which can then result in a separate notice for each building. However, this requirement has presented some difficulty for landlords as the Act does not contain a definition of 'building' and therefore the question of what qualifies as a 'building' has been a point of contention for many years.
Fortunately for landlords the recent case of SGL 1 Ltd v FSV Freeholders Limited [2025] EWHC 3 (Ch) the High Court has provided some guidance, after it found that all four blocks of flats at Fox Street Village, Liverpool constituted a single 'building' under the Act.
Case background
SGL 1 Ltd ("SGL") acquired the freehold interest in four blocks of flats (Blocks A, B, C, and E) at Fox Street Village, Liverpool, from the administrators of FSV Ltd ("FSV"). Prior to the transfer, the administrators of FSV had served two Section 5 notices: one notice was served in respect of block A, and another notice for blocks B, C, and E together.
Validity of these notices was later challenged on the basis that all four blocks should be treated as a single building (therefore only one notice should have been served). This was because:
- Shared facilities: All four blocks shared common facilities and amenities, such as access roads, car parks, and refuse storage, making them a single building.
- Community: Fox Street Village was constructed as a student accommodation and students would mingle, demonstrating interconnection between all four blocks.
- Council Acknowledgment: A planning enforcement notice was served relation to all four blocks collectively.
- Tenants' Association: There is a single tenants’ association for the whole of the Fox Street Village development.
However, SGL argued that the blocks were separated and the administrators had correctly served two sets of notices because:
- Distinct Services: Blocks B, C, and E shared utilities, a plant room, and other services, making them a single building for the purposes of the Act while Block A was a separate, self-contained building with its own utilities.
- Construction: Blocks B, C, and E were constructed as a single project, sharing services, materials, and labour while block A was constructed first as a separate project.
- Planning: Planning permission for block B, C, E were granted at the same time while the planning permission for A was granted first.
The court held that determining whether multiple structures constitute a single 'building' requires weighing and balancing several competing factors. These factors include plans of the structures, underlying structural support, lessees' rights to use appurtenant premises, connections at any levels, dates of construction, management of structures, service charge operation, visual impressions, means of access, servicing of structures, sharing of common facilities and planning history.
The court concluded that it was a 'multi-factorial evaluation exercise' and a particular factor or factors may carry more weight than others. In reaching judgment in this case, whilst planning, enforcement and structural connection all played a role in the final determination, the court placed particular emphasis on the single shared access road and facilities of the blocks, which were essential for accessing car parking and refuse storage.
The court ultimately determined that all four blocks were a 'building' for the purposes of the Act and therefore the two separate notices which had been served were not valid.
Conclusion
The case underlines the importance of considering the practical realities of shared amenities and access when determining whether multiple structures constitute a 'building' for the purpose of Section 5(3) notices. This is a rare case which comments on a particularly problematic area of law for landlords and the decision will provide welcome guidance for legal advisers and practitioners, particularly those advising on integrated developments with shared facilities.
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