Under the spotlight

Under the spotlight

Rights to light continues to prove a thorn in the side for developers who can no longer rely on damages to resolve a dispute.

The cases of Regan v Paul Properties Ltd and HXRUK II (CHC) Ltd v Heaney serve as ominous reminders that the Court's primary legal remedy for all infringements, other than minor ones, is to grant an injunction instead of awarding damages, irrespective of the stage that the works have reached.

This can have disastrous consequences for a developer as, in addition to the time needed to carry out the work, the cost of alterations following an injunction is significantly higher than the level of damages that may have to be paid. For example, adjusting the development in the Heaney case was estimated at over £2.5m. So it's understandable that rights to light is seen as a major barrier to development projects.

Redressing the balance

The Law Commission, in last year's consultation paper, examined whether the existing options available to the Courts were "reasonable, sufficient and proportionate". It also sought to address the perceived imbalance between the interests of those who hold rights to light and those wish to develop land.

The paper contained a number of provisional proposals, of which, the key ones were that:

  • existing rights to light already acquired will be retained, but it will not be possible to acquire rights by prescription in the future
  • a statutory test will be introduced to help Courts decide if damages should be awarded instead of an injunction. This would be a modification of the existing criteria used by the Courts to make a decision, and key to this is whether granting an injunction is judged to be 'oppressive' or 'disproportionate'
  • a voluntary statutory notice procedure will be introduced to prevent an affected owner from asserting their rights, but then sitting back and doing nothing. Following notice being served, those with a benefit of rights to light will have a period of up to eight months in which to object and negotiate. If no agreement is reached, the objector must issue proceedings
  • the Lands Chamber will be able to modify or discharge existing rights to light. If this occurs, compensation would be payable based on loss in value of the affected property rather than a percentage of the profit on the development.

An image of skyscrapers in Canary Wharf, LondonOur view

While these proposed changes, if implemented, would redress the balance, a number of commentators in the legal press have already voiced their opinion that the proposals go further than expected in aiding developers, so we think they are likely to be watered down before becoming law.

For instance, the idea of removing the ability for individuals to obtain prescriptive rights in the future is unlikely to be well-received by the general public. In fact, the day after the paper was published, the front page of the Telegraph reported on the proposals, describing them as an "assault on planning rules" and suggested to its readers that removing the protection would leave almost three million households "powerless to prevent large developments near their homes". A similar story was also posted on the Daily Express website, which sparked a number of negative comments from readers.

It's not just the general public who may be unhappy with the proposals. Developers too, are unlikely to be keen on the idea of issuing a voluntary "put up or shut up" notice to potentially affected owners. They may feel that it only serves to stir things up unnecessarily; almost encouraging potential claimants to respond, and increasing the likelihood of an injunction or damages being awarded. And the possibility of delay costs will also be of great concern to developers, as they will be unable to proceed in the notice period.

The future

It will be interesting to see what develops when the Law Commission publishes their full report on rights to light, including a draft bill. However, this isn't anticipated until the beginning of 2015 at the earliest. So, from an insurance perspective, nothing has changed. In the future, we may need to adjust our approach to offering cover, but the need for insurance to protect developers if an affected party pursues a rights to light claim will still exist, come what may.

Countrywide's Rights to Light policy

With years of experience handling complex commercial legal indemnity enquiries, we are one of only a few companies to offer a specific Rights to Light indemnity cover.

Our policies are designed to protect the developer where they believe a development has the potential to block, or partially block another property owner's light, and that person may pursue a rights to light claim.

Each case we consider is looked at according to its merits, and where steps have been taken to mitigate a risk, we are able to adopt a flexible approach as regards pricing and cover. Similarly, a developer may opt to pay an excess in the event of a claim in order to reduce the premium.

As standard, our policies cover the following potential losses:

  • damages awarded by the court or settlement costs agreed out of court by the insurer
  • any expenses involved in complying with an injunction
  • a reduction in market value following enforcement action
  • abortive construction costs and contractual liabilities
  • all legal defence expenses incurred

If you have a rights to light case that you'd like us to consider, why not call one of our specialists.