What is a “Building”? The Court of Appeal gives guidance on the definition of a Building for Right of First Refusal Notices

If you own or invest in a multi-block residential development, a recent Court of Appeal decision should be on your radar.

In SGL 1 Ltd v FSV Freeholders Ltd [2026] EWCA Civ 267, handed down on 13 March 2026, the Court of Appeal fundamentally changed how the Courts will determine what is a “building” for the purpose of the right of first refusal under Part I of the Landlord and Tenant Act 1987. The consequences of getting this wrong are serious, including criminal liability, so this is one that landlords, investors and developers need to carefully consider and take legal advice where necessary.

The Right of First Refusal – A recap

Part I of the Landlord and Tenant Act 1987 permits “qualifying tenants” of flats a statutory right of first refusal when a landlord proposes to sell (or otherwise dispose of) the freehold or grant a long lease of a building containing flats. Before making such a disposal, the landlord must serve an “offer notice” on qualifying tenants under section 5, giving the tenants the opportunity to buy on the same terms.

Crucially, section 5(3) provides that where the proposed transaction involves more than one building, the landlord must sever the transaction and deal with each building separately. In practice, this means serving separate notices for each building.

The problem: what is a “Building”?

Really unhelpfully, as with most land-related legislation, the Act does not define “building.” That might sound like a minor drafting oversight, but in practice, it creates real difficulty, particularly on multi-block sites where several structures share a single freehold title, common facilities, or shared access arrangements. For example, is a development of five connected blocks one building or five? The answer, of course, determines how many notices a landlord must serve, and getting it wrong can invalidate the entire process.

Facts of the case

If you Google the development, at the centre of this case, it will say “Fox Street Village is a troubled multiblock residential and student-style accommodation”. It earns its troublesome title through fire safety issues, a council prohibition order, and, not least, “administrative issues,” which is code for expensive right of first refusal litigation. The blocks were originally Blocks A through E and are all held under a single Land Registry freehold title. Block D was demolished following a fire, leaving Blocks A, B, C and E.

Block A was a separate refurbished warehouse with its own services and utilities. Blocks B, C and E shared access arrangements, plant and servicing.

When the development went into administration, and a sale was proposed, the administrators served two section 5 notices, one for Block A and one for Blocks B, C and E together. The tenants’ nominee purchaser challenged the notices, arguing that all four blocks constituted a single building, meaning the notices should not have been severed at all… here begins the trouble.

The First Instance decision

The judge at first instance agreed with the tenants. Applying the approach in the earlier case of Long Acre Securities Ltd v Karet [2005], the court found that all blocks were a single building. The effect was to invalidate both notices.

The Court of Appeal decision

The Court of Appeal overturned the first instance decision and held that the Long Acre case had taken the law in the wrong direction. In its place, the court established a new central test namely do the building structures fall within a “functionally integrated built envelope.”

Applying that test to the Fox Street Village, the court found:

• Block A — a separate refurbished warehouse that stood on its own, with its own services and utilities. It was a separate building.
• Blocks B, C and E — sufficiently integrated through shared access arrangements, plant and servicing to constitute a single building.

There were therefore two buildings, two notices were required, and the administrators’ notices were valid.

Why is the decision important?

The Court highlighted the fact that shared amenity areas or rights over common parts do not automatically mean that separate structures must be treated as a single building. The test is functional integration of the built envelope itself, namely shared services, access and plant, rather than simply whether occupiers happen to use some of the same external areas.

This decision matters most where multiple residential blocks sit within a single freehold title. That is common in larger developments, build-to-rent schemes and former commercial sites that have been converted to residential use.

Key points to bear in mind:

• Title boundaries alone will not answer the question. A single registered title can contain multiple buildings for the purposes of the Act.
• Shared utility arrangements, common plant and shared access are the key indicators of functional integration.
• Shared amenity spaces or communal gardens are not, by themselves, enough to make separate blocks one building.
• The analysis is highly fact-sensitive. Two developments that look similar on paper may reach different conclusions depending on how services and access are configured.

If you get it wrong

This is not an area where an honest mistake carries no consequence. If a freehold is transferred without proper section 5 notices:

• It is a criminal offence under section 10A of the 1987 Act, punishable by a fine.
• Qualifying tenants acquire statutory rights against the purchaser, including the right to information about the disposal and potentially the right to compel a transfer on the same terms.
• There is a credible argument that property disposed of in breach could constitute “criminal property” within the meaning of section 340 of the Proceeds of Crime Act 2002 — with all the money laundering implications that follow.

These are not theoretical risks. They apply to any relevant disposal, including a transfer to a residents’ management company.

What you can do

If you are considering any disposal of a freehold or long lease that includes residential flats, particularly on a multi-block site, then seeking early legal advice is essential. The question of what constitutes a “building” now turns on a detailed factual analysis of how structures are physically and functionally connected, and the consequences of an incorrect assessment are severe.

The new test provides greater clarity than before, but it remains fact-sensitive. Do not assume that because blocks are on one title, they are one building, and do not assume that because they look separate, they necessarily are. Take advice, get the analysis right, and protect your position.

Contact our Property Disputes solicitors today

At Ashtons Legal, we regularly advise landlords, property owners, and agents on their rights when tenants fail to vacate on time. Whether you are dealing with a residential, commercial, or mixed-use property, our Property Litigation team can help you assess your options, serve the correct notices, and pursue recovery where appropriate.

Please get in touch with our specialist Property Litigation team via our online enquiry form or by calling 0330 404 0738.