Don't let the lights go out on your development
September 2010
by Kevin Mills
A recent High Court decision shines a light on a key issue for commercial property developers. If ever there were a good reason for developers to review their rights to light strategy on new developments, this is it.
The decision was reached in the case known as HKRUK II (CHC) Limited v Marcus Alexander Heaney. The case centred around the question of whether the Court should issue an injunction (in this case, 'mandatory' forcing the developer to remove any offending part of a building already built), or award damages against the developer to compensate it's neighbour for an infringement of their rights to light. The infringement itself was never in doubt.
Unusually, the High Court decided that a mandatory injunction should be issued. Had this been a horror movie, one can only imagine that the developer might have been in a similar state of panic to that of the girl in the shower when the scary music announces the unthinkable dénouement. As a result of the decision, the developer - who has already completed the office building - is likely to be required to demolish part of the two floors of the office building causing the rights to light infringement. What's more, one of the floors is already let to an occupier who would have to be re-located while any demolition work takes place. All of which will add significant cost to the developer.
This is clearly a worrying development for developers, though this sort of Court decision is not common...or at least, not at the moment. In fact, the decision in question is going to appeal, so it is not quite definitive. Nonetheless, if the appeal is rejected, then this could mark a shift in attitude among the courts, which results in more decisions being made in favour of injunctions as opposed to damages.
What this suggests is that developers might need to be even more wary of how they resolve their rights to light issues going forward. In the case quoted, the developer took all the right legal steps and still they're now facing an injunction.
First Title comment
If the tide is turning, developers will have to re-evaluate how they address the critical issue of rights to light, as it is a key risk with the potential to cause untold damage to a development in a number of ways and at various stages of its lifecycle.
The costs involved in dealing with rights to light can be so significant as to cause a development not to be able to start, or to be stalled part way through, or to be left uncompleted. And beyond the financial burden and strain on the developer and their investors, there could be knock-on implications for the development site itself and the surrounding area that remain blighted for some time.
But there are already some straightforward solutions to help developers manage the risks associated with rights to light. It's clear that good legal counsel is indispensable. In addition to that, developers should also think about the advantages of bespoke indemnity insurance to help protect themselves and their developments from the potentially crippling impacts of either damages or an injunction (whether prohibitive or mandatory).
Our experience working closely with developers has helped us to develop processes and practices that go a long way to mitigating the risk.
The effectiveness of our rights to light insurance policies is predicated on thorough due diligence: a sound understanding of the site and its planning history; detailed light surveys by specialist surveyors; and in-depth knowledge of this complex area of property law. This enables our expert underwriters to make the right assessments and provide cover that supports the legal process and gives additional peace of mind to clients.
Even if the recent High Court decision referenced above casts a shadow over the development pipeline for some developers, First Title has the know-how to provide a way of ensuring that there is light at the end of the tunnel.
If you have a client who is wrestling with rights of light issues contact First Title Insurance plc and, expert-to-expert, we will consider with you the availability of an appropriate indemnity insurance solution. Contact Kevin Mills, kmills@firsttitle.eu, or call 0207 832 3132.
Alternatively
For all other situations there is an equally effective and straightforward process via:
- email commercial- comm.team@firsttitle.eu
- email residential- specialistproducts.team@firsttitle.eu
- fax- 0870 389 9980 before 12pm and we'll reply the same day
- phone- 0207 832 3100 and speak to a legally-qualified underwriter