As space commands a higher and higher price in our cities, new buildings are being put up ever closer together and reaching ever taller. London, with its record land prices, already has the UK’s largest concentration of commercial skyscrapers. After a slowdown in development during the economic recession, Savills Project Consultancy’s ‘Commercial Development Activity’ (March 2010 summary) reports the sharpest rise in commercial development activity since May 2007. This will bring back to the fore the problem of rights of light.
As new buildings go up, they often overshadow their older neighbours and this has pushed the issue of access to light up the agenda of the development process. Even if a developer overcomes the hurdles of daylight and sunlight presented by the planning process, it cannot underestimate the impact of private rights of light and how they may restrict development aspirations. Occupier neighbours should be aware that there is real value in these rights and so the power they give cannot be overlooked.
background
A right of light is an easement. It is the right to receive sufficient natural light through defined apertures (for instance windows, skylights and glazed doors) to allow a building to be used for its ordinary purpose. It may be expressly created (eg by deed), implied by law or acquired by prescription. Surveyors calculate the degree of infringement by use of advanced computer software. At its most basic, if the level of light falls below the ‘grumble point’, it amounts to a common law nuisance. The test is not the amount of light removed but the amount of light that is left. The affected neighbour may seek an injunction to stop the development, to require the design to be cut back or to demolish the offending part. Alternatively, the neighbour may be awarded damages.
The surveyors’ technical calculation is not a rigid rule of law, but it is a helpful starting point. The courts consider the impact on existing occupiers and the social utility of the offending development. The approach is different in residential and commercial premises. The courts also look at the conduct of the parties. An injunction is an equitable remedy so behaviour is an essential factor. Did the affected party seek to protect its rights early enough? Did it seek an interim injunction? Did the developer deliberately ignore neighbours’ protests and speed up its development programme in spite of them?
Case law
The increasing importance of rights of light is reflected in the publicity generated by cases over the past few years.
Midtown Ltd v City of London Real Property Company Ltd [2005]
Midtown was a dispute over a development in New Fetter Lane and provides an interesting analysis of the factors that the court considers when deciding whether to award damages or an injunction. The claim was brought by a developer-owner, Midtown, and an occupying firm of solicitors, Kendall Freeman (the firm has since merged with Edwards Angell Palmer & Dodge UK LLP). The court concluded that:
- The occupiers’ primary interest was financial. Midtown was a property development company with plans for its own site. Its interest was based on a desire to maximise the financial payment. Kendall Freeman was in a slightly different position as an owner-occupier. Nevertheless, the court felt that the law firm’s primary interest was also financial.
- The developer had behaved reasonably and openly in highlighting the rights of light issues at the outset and suggesting meetings. By contrast, the neighbours had rebuffed this approach unreasonably. Behaviour was a crucial factor.
- The development would not impact on the use of artificially lit modern offices, despite witnesses expounding the joys of natural light. This was evidence that counsel called ‘twaddle’.
Tamares (Vincent Square) Ltd v Fairpoint Properties (Vincent Square) Ltd [2006]; [2007]
Tamares involved two court hearings, one on an injunction application and one on the assessment of damages.
Tamares applied for an injunction to stop the development of the former Rochester Row Magistrates Court site interfering with the access of light to its neighbouring Olsen office building.
The court endorsed the principles set out in Shelfer v City of London Electric Lighting Company [1895] as ‘a good working rule’ if:
- the injury to the claimant’s legal right is small;
- it is capable of being estimated in money;
- it can be adequately compensated by a small money payment; and
- the case is one in which it would be oppressive to the defendant to grant an injunction, then damages may be awarded instead.
Fairpoint had acted honestly throughout, Tamares had not applied for an interim injunction, the bulk of the new building was complete by the hearing and would require substantial demolition, and the injury to the windows was trivial in the context of the whole. It would be oppressive to grant an injunction.
The court derived eight principles from previous cases when assessing the amount of damages to award instead of an injunction:
- overall the court should seek a ‘fair’ result of a hypothetical negotiation between the parties;
- the context including the nature and seriousness of the breach must be kept in mind;
- the right to prevent a development (or part) gives the owner of the right a significant bargaining position;
- this owner will normally be expected to receive part of the likely profit from the development (or relevant part);
- if there is no evidence of the likely size of the profit, the court can do its best by awarding a suitable multiple of the damages for loss of amenity;
- if there is evidence of the likely size of the profit, the court should normally award a sum that takes into account a fair percentage of that profit;
- the size of the award should not be so large that the development (or relevant part) would not have taken place if such a sum has been payable; and
- after arriving at a figure that takes into consideration of all the above and any other relevant factors, the court needs to consider whether ‘the deal feels right’.
Reported cases on equitable damages are rare and so this decision is worthy of note. Until this decision I have advised developers that, when the courts order profit share (as opposed to applying a multiplier to the diminution in value), they should budget for an award of 5% to 15% of the profits they make from the infringement. Here a ‘modest’ infringement sat just below 30%, previously considered the high end of the scale. This may signal an increase in the damages awarded.
Regan v Paul Properties Ltd & ors [2006]
Regan saw the Court of Appeal consider its first rights of light decision in 20 years.
Dennis Regan owned a maisonette in Brighton next to a mixed-use development. At the outset Regan expressed concerns about the reduction of light to his living room, but did not think that he could take action until the works had begun. The defendant’s rights to light surveyor advised (wrongly as it turned out) that the development would have no actionable impact. Regan sought an interim and final injunction to stop the development once construction had advanced. At first instance the judge ordered damages instead of an injunction. The Court of Appeal disagreed. The starting point was an injunction. Here, the injury was not small. To use his living room Regan would have to use artificial light or move closer to the bay window where he would be in full view of his new neighbours. Compensation of £5,000 was not a small money payment. An injunction would:
- have a serious impact on the development;
- reduce the sale price;
- create extra costs; and
- possibly cause planning and building regulation difficulties.
Although the developer’s losses may be substantial, the Court of Appeal took the view that this factor on its own did not make it oppressive. It had to consider all surrounding circumstances and conduct. Here the developer had taken a calculated risk in proceeding after Regan’s complaint, even though it had relied on incorrect advice and should bear the consequences.
Conclusions from case law
Commentators have expressed concern at the apparently different approaches in Midtown, Tamares and Regan, but I do not think they are necessarily inconsistent. What they do emphasise is that an injunction remains a real risk – perhaps developers had relaxed too much after Midtown – and whether damages are awarded instead depends on many factors. A significant factor is whether the affected premises are residential or commercial.
role of local authorities
Developers need to take care because even if they are not prevented from building – and this cannot be excluded even if building has been commenced – damages may have a significant impact on the commercial viability of their scheme.
All is not lost, however, if a development is endorsed by the local authority. Hammerson caused a degree of excitement in recent years in its efforts to redevelop the old Stock Exchange site that it claimed was being scuppered by its neighbours’ reluctance to negotiate releases of their rights to light. If a settlement cannot be reached, a local authority may be prepared to step in and use its powers under s237 of the Town and Country Planning Act 1990. Section 237 gives local authorities the power to appropriate land for planning purposes. This has the effect of wiping the land clean of private rights (including rights of light) and converting them into compensation payments. The threat of an injunction is removed and the measure of compensation is the diminution in value of the affected interest. The City of London Corporation came to Hammerson’s assistance and resolved to appropriate using s237.
Historically, local authorities have been reluctant to use this power, but increasingly they appear willing to facilitate favoured development.
four Tips for Dealing with Rights of Light
One
The most important tip for a developer is to be aware of its neighbour’s rights from the outset and obtain specialist rights of light advice (legal and surveyor) early on in the project. Planning is key and the developer should look to resolve any issues as soon as possible. The longer a developer waits, the greater the beneficiaries’ ransom position. Potential claims must be factored into the development appraisal – especially if an injunction can be avoided – and the developer needs to take into account potential cutback exercises or damages payments that may be substantial.
If several parties are affected by a development (which is not uncommon) the quantum of damages – even where injunctions are avoided – can be a fundamental factor in assessing the viability of a development. At best, delay adds expense, such as holding costs, financing costs and construction costs. As an occupier-beneficiary you need to be aware of how rights of light issues are perceived and dealt with by developers.
Two
For a developer, it is important to consider strategy early on for eliminating or minimising the risk of a claim. The best way of resolving a claim is to agree a release in exchange for a sum of money. A different strategy may be required for residential as opposed to commercial occupiers. It is not unreasonable to assume that – for a commercial occupier – a financial payment is adequate compensation. However, the same rules do not necessarily apply to someone’s home.
Three
If agreement cannot be reached and if an injunction remains a risk, remember that the courts look at the conduct of both parties when considering whether to exercise their discretion. With this in mind as a developer it may be appropriate to commence negotiations early on. Communication is the key and keeping affected parties informed is not only best practice as part of any construction programme but it will also benefit the developer if an injunction is sought. If an open approach is adopted, it is essential that a compensation offer is made early on (and again this should be encouraged) and it should be put on an open basis. If the beneficiary expresses an interest, even if it does not accept the offer, this is best evidence that the infringement can be adequately compensated by money. As an occupier the ransom value of rights will be lost if the issue of money is discussed.
Four
If time is sufficient, a developer should consider the use of the Light Obstruction Notice procedure. In the past, people erected screens to prevent their neighbours acquiring rights of light. Under the Rights of Light Act 1959, a Light Obstruction Notice may now be registered as a local land charge against neighbouring properties. This acts as a notional obstruction that is deemed to block the access of light to those properties. The affected parties have one year to object to the registration, which they can do by showing that they have existing rights of light that the notional obstructions infringes. This procedure is beneficial on several different levels. In broad terms, it is a useful exercise to flush out potential objections to the development in plenty of time. More significantly, it can eliminate possible objectors if they fail to act within the requisite time frame. If a neighbour has prescriptive rights of light by virtue of 20 years’ enjoyment, but fails to object within a year, the right is deemed to be interrupted and the 20-year clock starts to run from zero again. Finally, it is a tool to prevent a building nearing 20 years of age from acquiring prescriptive rights of light. This is useful if future development is planned and is a cost-effective way of eliminating future problems. As an occupier always deal with Light Obstruction Notices and challenge them wherever possible.