An offer notice giving qualifying tenants the right of first refusal under the Landlord and Tenant Act 1987 should contain the terms in relation to the individual building – it does not have to provide details of the proposal for the whole site in which the building is situated.
In FSV Freeholders Ltd v SGL Ltd [2023] EWCA Civ 1318; [2023] PLSCS 188, the Court of Appeal rejected the argument that it was necessary for an offer notice to provide information on the proposed sale of the whole estate of which a building formed part.
Part 1 of the 1987 Act sets out the “Tenants’ Right of First Refusal”, giving a right of first refusal to certain tenants of flats in buildings where the landlord intends to sell his interest. Section 5 requires a landlord who proposes to make a relevant disposal to serve the relevant tenants with an offer notice containing the principal terms of the disposal proposed (including the deposit and consideration). Section 5(3) requires a landlord proposing to enter a transaction disposing of an interest in more than one building to sever the transaction and deal with each building separately.
The administrators of the freeholder of Blocks A-E, Fox Street, Liverpool L3 3BQ (the “Entire Property”) proposed selling it to the respondent at a purchase price of £1.6m with a deposit of £80,000. The proposed price comprised £350,000 for Block A, £1,050,000 for Blocks B, C and E, and £200,000 for Block D. The proposed sale had a number of conditions precedent including delivery of a “sealed court order” authorising the sale.
Two sets of offer notices were sent out – one for Block A and the other for Blocks B, C and E. Block D was empty and therefore outside the 1987 Act. The notices for Block A advised that the offer price was £350,000 and that there was a 10% deposit. The other notices advised that the price was £1,050,000 and made no mention of a deposit. For the purposes of this appeal it was assumed that it had been correct to treat Block A as one building and Blocks B, C and E as another.
The Court of Appeal did not accept that the notices should have provided details of the proposed disposal for the Entire Property and were therefore invalid. Where section 5(3) applies, references in the section to “disposal” and “contract” should be interpreted as referring to each separate building.
Further, when section 5 is read as a whole, there is no room for the interpretation that the offer notice should contain details of both the contract in relation to the Entire Property and for the building. In any event the requirement of a “sealed court order” was not a principal term but merely part of the machinery for completion and would not have to be included in an offer notice.
Elizabeth Haggerty is a barrister
