The Over Shadow of Rights of Light…
‘Appropriation for Planning
For Real Estate developers, Rights of Light continue to be a major financial concern– does the use of appropriated land mitigate these risks altogether?
Purposes’…
In recent years, the enforceability of and implications arising from Rights of Light issues have been continually tested and challenged in the courts – over the last eight years in particular, case law has muddied the legal waters surrounding appropriate remedy available to property owners who have suffered a reduction in the level of light that they lawfully enjoy. Rights of Light are a legal easement that can be acquired by a property in several ways; the most common method is by prescription, which arises from an uninterrupted enjoyment of the light through an aperture for at least a 20 year period. Any infringement of light can be actionable upon an offending party, with significant damages awarded or an injunction imposed as recourse. For Real Estate developers, the implications of an interference to Rights of Light could be hugely costly – a multi-million pound development constructed in a city centre could have numerous injured neighbouring properties, and just one claimant has the potential to seriously affect the ultimate profit of the project, or even prevent the development altogether.
Although not specifically defined by the Act, ‘planning purposes’ is generally understood to mean;
The facilitation of development or redevelopment The improvement of an area socially, economically, or environmentally For the interests of the proper planning of an area
The 2010 case of HKRUK II (CHC) Ltd v Marcus Alexander Heaney demonstrated the impact that a Rights of Light claim could have for the developer. The fully completed, fully tenanted penthouse floors of the Manchester development were deemed injurious upon the rights of an adjacent property, and the courts imposed an injunction for the offending section of the development to be cut-back to allow the lawful amount of light into the neighbouring dwelling. On appeal, the case was settled out of court for what are believed to be significant damages.
Understandably, the Heaney case created alarm within the Real Estate sector; as a remedy to counteract the threat of injunction, developers began to utilise the provisions of the Town and Country Planning Act 1990, which permits the infringement of property owner rights in certain qualifying circumstances. Under s.237 of the Act, a local authority gains the ability to override Rights of Light (and other easements that benefit the neighbouring land owners) when they appropriate development land ‘for planning purposes’, and disposal of such land sees this right to override those rights pass to the purchaser. The appropriation process allows development to take place and removes the injunction risk to the developer altogether; as such, this is a practically viable way to minimise any Rights of Light issues and proceed with development without fear of injunction pre or post completion. However, the right for the injured property owner to claim compensation remains, with the level of compensation payable generally assessed using three times the basic book value of loss (as outlined by a specialist surveyors Right of Light report); it is not unheard of for compensation negotiations to begin at a significantly higher level than the book value of loss – and this can be the scenario for every injured property in the locality of the site. Rights of Light indemnity policies are one way in which developers can transfer the risk of loss attributed to Rights of Light – the complex nature of this area of law, a knowledge of insurer market appetite, and the intricacies of policy wording and structure, are all vital considerations in ensuring that any Rights of Light insurance policy offers the highest level of protection for Real Estate development assets. Many insurers will not offer cover for Right of Light risks, but those that do take differing views on
how to assess the potential loss and structure of the policy, particularly when the land has been appropriated under s.237 of the Act. Party wall negotiations, crane oversail agreements and other neighbourly matters are also critical factors to consider, therefore it is important that the developers requirements are fully understood in order to provide a robust insurance solution which will provide indemnity for compensation payments, legal fees, and the consequential losses which may arise from delayed completion, loss of rental income and the cost of alternative accommodation should tenant leases already have been entered into. Despite the evolving case law, the matter cannot be fully addressed without fundamental changes to statute, and a recent Law Commission review looks set to do just that. A proposed change to the legislation relating to the Rights of Light easement would prevent the hindrance of development projects and encourage activity in the construction sector in line with Government policy. An on-going and contentious area of property development, it is not if, or known when, such changes will come into effect; even in instances when the provisions of the Town and Country Planning Act are utilised to minimise losses, the potentially substantial financial risks arising from the enforcement of Rights of Light will remain a significant threat for Real Estate developers for the foreseeable future. Louise Jones LLB (Hons) Dip CII, Business Development Executive, Thomas Carroll Legal Indemnities e t m
louise.jones@thomas-carroll.co.uk (029) 20 858 602 07879 665 605