FSV Freeholders Ltd v SGL 1 Ltd

Factual and Procedural Background

This appeal concerns whether two sets of offer notices dated 11 February 2020, served by the administrators of Company A upon qualifying tenants, complied with sections 5 and 5A of the Landlord and Tenant Act 1987 ("LTA 1987"). These notices related to the disposal of the freehold title of Blocks A to E at a property in The City, and the tenants' rights of first refusal concerning Blocks A, B, C, and E.

District Judge [Lampkin] initially declared that Company A, the then freehold owner, had complied with section 5 LTA 1987 in disposing of the entire property to Company B, dismissed the Appellants' claim as meritless, and ordered costs against the Appellant and other Defendants.

On appeal, Judge [Fancourt] partially allowed the appeal, set aside the previous order, and restored the claim to determine whether Blocks A, B, C, and E constituted one or multiple "buildings" under Part I of the LTA 1987, and whether the notices served were valid under sections 5 or 5A. Directions for hearing and costs were made.

The judge rejected arguments that the section 5 notices were invalid for failing to set out terms relating to the entire transaction or that the sale to Company B was invalid due to the severed nature of the notices.

The offer notices served on 11 February 2020 included separate notices for Block A and for Blocks B, C, and E, each specifying terms such as consideration and completion details. Block D was excluded from the notices as it was not subject to Part 1 of the LTA 1987.

No acceptance notices were served by qualifying tenants. Subsequently, Company A (in administration) contracted to sell the entire property, including all blocks, to Company B for £1.6 million. The contract included conditions precedent, including a sealed court order authorising the sale, which was obtained. Completion occurred on 25 November 2020, and Company B became the registered proprietor.

Qualifying tenants were reportedly unaware of this contract and offered to purchase the entire property for £1.65 million, which was rejected. The Appellant, Company C, was incorporated and authorised by 115 qualifying tenants as their nominee for acquiring the freehold.

Subsequent statutory notices were served pursuant to sections 11A and 12B LTA 1987 requiring Company B to provide particulars of the disposal and to transfer the property to Company C, with a default notice served thereafter. Company B issued a claim seeking a declaration of compliance with Part 1 of the LTA 1987, which led to the proceedings below.

Legal Issues Presented

1. Whether the offer notices served by the administrators of Company A complied with the requirements of sections 5 and 5A of the Landlord and Tenant Act 1987 in the context of disposing of multiple buildings as part of one transaction.
2. Whether Blocks A, B, C, and E constitute one or more "buildings" for the purposes of Part 1 of the LTA 1987, affecting the validity of the notices.
3. Whether the section 5 notices needed to include the overall contractual price, deposit, and conditions precedent related to the entire property disposal to be valid.

Arguments of the Parties

Appellant's Arguments

• The section 5 notices were deficient for not stating the total contract price of £1.6 million, the £80,000 deposit requirement, and the condition precedent of obtaining a sealed court order.
• Severance of the transaction under section 5(3) is an independent requirement, but notices must also state the terms of the entire disposal, ensuring transparency for qualifying tenants.
• The term "transaction" in section 5(3) differs from "contract" in section 5A, and the notices should include particulars of both the entire property and the specific building to which the contract relates.
• Qualifying tenants should be informed about the entire proposed disposal to prevent arbitrary or unfair apportionment of the purchase price.

Respondent's Arguments

• The offer notice's purpose is to inform tenants of the price and terms relevant to their specific building, enabling them to serve an acceptance notice under section 6.
• The price and terms included in the offer notice should relate to the severed part of the transaction concerning the particular building, not the overall transaction.
• The terms "transaction" and "contract" in sections 5(3) and 5A(2) respectively may not have distinct meanings in this context.
• The sealed court order was a condition precedent to completion, not a principal term of the disposal, and therefore did not need to be included in the notices.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook a detailed statutory construction exercise focusing on sections 5, 5A, and related provisions of the LTA 1987. It emphasized that the offer notice under section 5 must be capable of acceptance by the requisite majority of qualifying tenants, making the notice's terms critical.

Section 5(3) mandates severance of the transaction when multiple buildings are involved, requiring separate notices for each building. The court held that the requirements of sections 5A to 5E are incorporated into section 5 and must be read in light of the severance requirement.

The court concluded that the term "property" in section 5A(2)(a) refers to the individual building subject to the severed transaction, not the entire site. Similarly, "contract" in section 5A(2)(b) should relate to the contract terms for that building alone.

This interpretation ensures that tenants receive relevant and specific information about the building in which they hold interests, enabling them to exercise their rights effectively. Providing only the overall contract price and terms for the entire site would not assist tenants in deciding whether to accept an offer.

The court rejected the Appellant's argument that notices must include both the terms of the entire property disposal and the severed transaction for each building, finding such an interpretation inconsistent with the statutory scheme and purpose.

The court also found that the sealed court order was not a principal term of the contract but a condition precedent to completion, and thus its omission from the notices did not invalidate them.

In sum, the court applied established principles of statutory interpretation, focusing on the language, context, and purpose of the LTA 1987 provisions, and concluded that the notices complied with the statutory requirements.

Holding and Implications

The court DISMISSED THE APPEAL.

The direct effect of this decision is that the offer notices served by the administrators of Company A complied with the requirements of sections 5 and 5A of the LTA 1987, and the disposal of the freehold title to Company B was valid in this respect. The ruling confirms that when multiple buildings are involved, notices must be severed and relate to each building individually rather than the entire property. No broader precedent beyond the statutory interpretation of these provisions was established.