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Rights to light cast a long shadow, but insurance can protect against disputes

Planning portal: Compensation claims have soared as a result of the uncertainty that surrounds rights to light

When local government secretary Eric Pickles announced last year that the Law Commission will review the ‘rights to light’ legislation, he stated that current law and practice had produced conditions of damaging uncertainty.

Among other things, the Law Commission will look at relationships between the planning system and rights to light – currently practically non-existent – and whether the law is ‘reasonable, sufficient and proportionate’.

Rights to light go back to the Middle Ages, but it was the 1832 Prescription Act that made blocking light to neighbouring properties an injunctionable offence. In reality, injunctions were not used and the act simply led to compensation being paid out to claimants. In the past few years, however, the courts have caught everyone on the hop by granting injunctions and in 2010 a case brought by HKRUK against Marcus Alexander Heaney over a Leeds office development led to a ruling that two floors of the building under construction should be removed. Although the parties subsequently settled out of court – thus failing to create any useful case law – the whole process sent tremors through the construction industry and, more importantly, through the lending community. The fear, already being realised, is that this will ratchet up compensation claims to alarming levels.

Banks, of course, drive developments these days. Their impact is there for all to see on the London skyline, where the Shard has soared upwards but other major developments in the heart of the City appear to be mired in financial haggling. And there are indeed projects that have been slowed by the fallout from the Heaney case; Rafael Viñoly’s Walkie Talkie building in Fenchurch Street being one of them. In this case the developers successfully invoked section 237 of the Town and Country Planning Act on the grounds that it provides economic benefits to the surrounding area. In calling the shots, banks, of course, want to protect their investment and they don’t like uncertainty. They will want a first charge on their loans, and may also insist on insurance policies being in place to afford this protection.

Insurance provides a number of remedies to the problem, covering areas such as damages and compensation, the costs of alteration and demolition and the fall in market value following a court order. However not all buildings are insurable. If the neighbours see the plans, for instance, and are aware of their rights of light, insurers are unlikely to take on the risk.

The key to deciding whether insurance is a solution or even an option is a specialist right-of-light survey, which will accurately assess the injury to owners of neighbouring buildings. Insurers can then decide whether the risk is insurable. Insurance will not only benefit the developer, financial backers and owner, but also subsequent owners, because the risk has been effectively dealt with.

Often developers are prepared to negotiate compensation awards with neighbours and employ insurance only to deal with ‘disaster scenarios’. The policy in this case will kick in when a rights-of-light injunction threatens the viability of the entire project. So there might be a very high excess of, say, £250 million, and developers would be encouraged to enter into a code of conduct to mitigate risks, which may, in this instance, include keeping their neighbours fully informed and negotiating with them over right-of-light issues.

City centre developments with multiple neighbours clearly present the biggest risk of right-of-light injunctions. But the Heaney case has muddied the waters. While no one has yet been forced to tear their building down, there is ample evidence that compensation claims have been soaring as a result of the uncertainty. Insurance offers a serious option for taking back control, at least until the Law Commission tells us all what is a reasonable course of action in these disputes.

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