A brighter future

The cases of Regan v Paul Properties Ltd [2006] EWCA Civ 1391 and HXRUK II (CHC) Ltd v Heaney [2010] EWHC 2245 (Ch) served as ominous reminders to developers and solicitors that the court's primary legal remedy for all infringements, other than minor ones, is to grant an injunction.

The Law Commission published a consultation paper on 18 February regarding rights to light, which contained a number of proposals that, if approved, would clarify and even up the law on when damages should be awarded instead of an injunction. A draft bill isn't anticipated until at least 2015 though, until then, for a developer to be able to proceed with confidence, some assurance is needed.

There are a few insurers that offer a specific rights to light policy that can protect developers in the event of a claim. However, with the significant threat of an injunction hanging over them, and the huge financial losses that this could bring, insurers are often reluctant to offer cover. So, developers must look at other methods in which they could potentially reduce the risk of a rights to light claim themselves.

Consultation

One way to mitigate a risk is for a developer to negotiate with those who have a right to take action against the development and resolve any potential claims before they arise.

While this course of action may help to reduce the overall risk, it's unlikely to remove it entirely, as it may prove impractical or impossible to contact all potential claimants before work commences. For example, one of the affected properties may have been converted into flats, and the landlord cannot be traced.

In this scenario, a rights to light policy could protect the developer if the landlord subsequently appears and claims for loss of light to his building. If the developer has managed to take care of some of the potential claims before construction work begins, and a rights to light policy is offered to cover the remaining risk, it's likely to be at a lesser premium to reflect the reduced exposure to claims.

The risk of a rights to light claim, as well as the amount of damages potentially awarded, can also be significantly reduced if a local authority invokes section 237 of the Town and Country Planning Act 1990. Under the Act, local authorities are able to override some of the rights of third parties, including their rights to light, so that a developer is allowed to proceed without the threat of an injunction.

Before exercising these powers, the local authority must take a balanced view of the impact of a development, and be satisfied that the works will enhance the economic, social or environmental wellbeing of the area, while also taking into account the effect on other properties. If the local authority chooses to exercise its powers under the Act, it will be because it considers the site as significant for local planning and development purposes, and it will have to acquire or appropriate the land for planning purposes.

Having done this, the affected party is entitled to apply for compensation from the local authority, but it is restricted to covering only the reduction in the value of their property, as per the Compulsory Purchase Code. If the developer is successful in securing the assistance of the local authority in this way, some insurers are able to offer a 'compensation only' policy, which will bring the price down significantly.

However, it's worth noting that instances where local authorities have exercised these powers are few and far between, and therefore it's not often a viable option for developers.

A brighter future

Putting aside the steps a developer could take to mitigate a risk, there's still the chance that they may be forced to stump up the funds to defend a claim, however unlikely it originally seemed. Even if the courts rule in favour of the developers, winning is still a costly business.

This was highlighted in the case of CGIS City Plaza Shares 1 Ltd v Britel Fund Trustees Ltd [2012] EWHC 1594 (Ch). Although there was a previous agreement with a former adjoining owner, which authorised interference with the light enjoyed by their property, the successors in title still brought a rights to light claim against the developer, for rights they felt they had acquired by prescription during their ownership.

Although the claimant's case was ultimately defeated, it's likely that the legal defence costs were funded up front by the developer. In instances such as this, there is very little that can be done to prevent a claim. If insurance is in place though, it provides a safeguard from the financial burden of legal fees and potential delay costs if a claim is subsequently brought.

There may be some respite for developers in the future, as the law regarding rights to light continues to be scrutinised. The proposals in the commission's recently published consultation paper aimed to strike a balance between those who hold rights to light, and those who wish to develop land.

The proposals arising from the consultation paper included:

The removal of the ability to acquire prescriptive rights in the future. Existing rights to light will be retained.

A statutory test 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'.

The introduction of a voluntary statutory notice procedure, to prevent an affected owner from asserting their rights, but then 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 being given the power 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.
 

The commission has invited responses to the consultation paper and it's likely that the proposals will be watered down before they become law.

For the time being, however, risk mitigation should remain the primary prevention measure, often in conjunction with insurance, to fully protect developers from rights to light claims.