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The glow that illuminates and the glare that obscures

Case update

Developers have been waiting with baited breath for the outcome of a Court of Appeal decision in the case of HKRUK II (CHC) Limited v Marcus Alexander Heaney.  But last week Property Week reported that the case had been settled out of court: http://www.propertyweek.com/5015822.article?origin=PWdailynews

The original High Court decision imposed a mandatory injunction in favour of the complainant, Mr Heaney, requiring the developer, HKRUK, to remove a proportion of two floors of a completed office development.  Part of the office was already let to new occupiers.  Last week's settlement means the case law established previously will now remain unchallenged.

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First Title comment

5th April 2011

by Kevin Mills

This turn of events will do nothing to help clarify the rights to light issue for developers. 

Whereas previously the general perception was that a commercial property was less likely to be successful in obtaining injunctive relief in the face of a right of light injury and certainly completion of the development would remove the threat of a mandatory injunction, Heaney has overturned these misconceptions.

Neighbours of new commercial developments may well see the news as a green light to now negotiate hard for much higher levels of compensation.  Lenders are also likely to become increasingly cautious about funding developments which could be subject to expensive compensation claims or mandatory injunctions that might significantly impact the security of their loans or the return on their equity finance.

The current state of affairs makes an already complicated situation even harder to resolve.

The judge in the original High Court ruling acknowledged that the decision was finely balanced.

The law has not changed, but this latest interpretation sends a clear signal that the general mood on rights of light may be hardening.  Developers might increasingly be facing court decisions that result in substantial compensation claims or force them into demolishing parts of completed schemes.  Either way, the impact could deal a major blow to development profits.  In some cases, the level of potential loss might make a proposed development entirely unviable.

As the Property Week article points out, developers can ask local planning authorities to use powers granted to them under section 237 of the Town and Country Planning Act to override any court decision.  This is a useful option but its success will likely be limited to cases involving large developments in which the local authority has a vested economic or political interest. 

So what else can be done?

Increasingly, developers are recognising the benefits of protecting their developments via a well-structured insurance solution.

First Title has worked hard to develop a right of light policy that will ring fence the developer's liabilities in order to protect them against the financial consequences of a threatened or actual injunction or a claim for compensation in relation to an infringement of a third party's right of light, by insuring:

• The costs of defending an action;
• The costs of acquiring deeds of release to permit the development to proceed;
• The diminution in the market value of the property as a result of the successful enforcement of rights of light; and
• Abortive costs incurred as a result of a court order or settlement.

The nature of rights to light means First Title's approach is more than ever based on rigorous 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) and very careful underwriting. 

Our in-house team of legal and insurance experts work closely with commercial lawyers on behalf of their clients to ensure they end up with the most appropriate policy for their needs.

If you think First Title could help you or your clients with their rights to light challenges, please contact Kevin Mills, Head of UK Commercial Underwriting, on  0207 832 3132, or via email: kmills@firsttitle.eu.

What we require

• Download a copy of the Rights of Light Insurance application form 

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