Building a development that infringes someone’s right to light could result in significant damages and even demolition. Aon’s Alison Goodwin, Public Sector Practice Leader, and Paul Weston, Client Manager – Legal Indemnities and Right to Light, explain how local authorities can manage this risk.
Demand for housing and office space means that building sites are part of the Great British landscape. But, with space at a premium, local authorities must ensure they consider neighbours’ rights to light when planning new developments.
Right to light is a form of easement which protects the right to maintain a level of natural light in their property. This level isn’t necessarily all the light the property owner currently enjoys but is sufficient to allow a room to be used for its ‘ordinary purpose’.
This legal right isn’t acquired automatically by a property owner, but there are various methods by which it can be acquired. The most common is through continuous enjoyment of light through a defined aperture for at least 20 years.
Where the owner has acquired this right, if a new building restricts the light, causing it to fall below the acceptable level, then the development could be considered an obstruction to their rights to light.
Legal redress
If this is the case, the property owner can seek legal redress. Courts have the power to award compensation to the property owner but could also grant an injunction requiring the developer to alter or even demolish their building.
As an example, in the case of HKRUK II (CHC) Limited v Heaney the judge granted an injunction requiring the developer to remove two floors of the building, two years after construction was completed, with a tenant in situ. Although the case was settled out of court before it went to the Court of Appeal, it gives a good indication of the risks and the potential costs developers face in right to light cases.
Calculating an appropriate level of compensation can be tricky however: surveyors will need to assess the severity of the injury; the use of the room which suffers light loss; the room depths and room partitions; rental value for the light and the average rental yield for the area. While this calculation will give a good indication of the potential compensation, this is never certain as the final sum will be agreed through negotiation.
Protecting your development
Given the risks, assessing the potential damage to adjoining properties is a must before embarking on any new development. A surveyor can provide a right to light report, detailing any potential issues, and Aon can then use this report to obtain insurance quotes to protect against financial liability should an injured property pursue a claim.
Taking out cover is common, especially in built-up areas. It is thought that around 90% of London developments are insured.
Traditional right to light insurance can be taken out pre-planning and offers complete financial protection should a third party come forward. This is known as Wait and See cover.
Insurers have recognised the need for developers to show good conduct and seek a settlement with injured properties early in the process, either to protect their image or in anticipation of an injunction being sought. Agreed Conduct cover allows this approach and caps the insured’s financial liability at an agreed level.
It comes with an excess, which typically equates to the estimated compensation budget. This leaves the insurer to pick up any further costs in the event of a claim, such as costs involved with defending an injunction and potential abortive costs in altering the development so as not to infringe rights.
The surveyors will recommend a suitable strategy and Aon is able to advise on how this can work with insurance.
Local authority action
Given the risks associated with right to light claims, local authorities must consider their exposure carefully when commissioning new developments. Developers are usually responsible for purchasing cover but it is prudent to ask how they are managing right to light risk; if they have arranged cover; and whether the financial model is appropriate and reasonable.
A specialist broker such as Aon can source quotes on your behalf that can be passed on to the developer, or provide advice on the insurance requirements and assess the suitability and cost of any cover a developer may be proposing.
Respecting the right to light of neighbouring property owners is an important part of any new development. But, with the potential for significant penalties where these rights are infringed, managing this risk appropriately is a must.
For more information about how Aon can help you manage this risk, contact Alison Goodwin.