The Court of Appeal has recently confirmed the correct interpretation of section 5 of the Landlord and Tenant Act 1987 in relation to serving notices where there is a disposal of an estate or interest that comprises more than one building.
Background
The case of SV Freeholders Limited v SGL 1 Limited [2023] EWCA Civ 1318, concerned issues arising from tenants' rights of first refusal where the landlord was disposing of the freehold of several blocks of flats.
In 2020, two separate notices were served on the qualifying tenants pursuant to the LTA 1987 regarding the proposed disposal of the blocks. The first notice related to Block A and the other related to Blocks B,C and E (D being exempt) as a single building. Each notice was in similar form and detailed the specific terms relating to each building with an apportionment of the price, not offering the freehold of the entire property in either notice.
As the qualifying tenants did not serve acceptance notices under the LTA 1987, the landlord proceeded to sell the entire freehold property to SGL1 Limited. The qualifying tenants then contested the validity of the notices and sought to acquire the freehold on the basis they should have been offered the freehold of the entire site.
In 2022, a District Judge dismissed the tenant's argument that the proposed terms of the disposal of the entire property should have been included in the notices and held that the provisions of section 5 of the LTA 1987 had in fact been complied with.
The Appeal
The appeal concerned whether the District Judge's interpretation of section 5 and 5A under the LTA 1987 was incorrect in relation to the form of two separate notices and the terms of severing that transaction.
The Appellants, FSV Freeholders Ltd, as the nominee purchaser authorised by 115 of the qualifying tenants in the blocks, argued that section 5(3) of the LTA 1987 was not satisfied as specific terms of the overall contract price, and its terms, should have been included alongside the severed terms of the transaction in the section 5 notice.
Lady Justice Asplin gave the leading judgement, holding that the section 5 notice must be capable of acceptance by the qualifying tenants, who can only do so if the terms of the notice refer to the building in which the qualifying tenants' flats are contained. The notice should not include the offer of the entire freehold estate as the qualifying tenants under each notice were only entitled to be offered their own building.
The appeal was consequently dismissed.
This case clarifies that when serving section 5 notices under the LTA 1987, there is no legislative requirement to provide information relating to the terms of disposal of an entire premises where the transaction must be severed as the tenants are only entitled to a right of first refusal in relation to part of the premises.