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Welcome clarity on rights to light?

  • Market Insight 30 March 2020 30 March 2020
  • UK & Europe

  • Infrastructure

For the first time in a number of years, the question over whether an interference to a right to light should be subject to an injunction has been considered by the courts.

Welcome clarity on rights to light?

The case relates to a proposed development of an apartment hotel on land owned by Florala Properties Limited in Moorgate in the City of London, which would cause interference to the rights to light enjoyed by the neighbouring commercial building owned by Beaumont Business Centres Limited.

Although "first instance" decisions are often highly fact specific, it is useful to see how a judge approaches a problem such as this in the real world.  These are the main points of interest that flow from the judgment:

1. "Waldram" analysis is still useful 

Traditional "Waldram" analysis for assessing rights to light has been criticised in modern times – it does date from the 1920s.  However – even though a more "modern" method known as "radiance" analysis was deployed in the case, it did not seem to perform well in the court room, with the judge expressing difficulties in interpreting the data he was being asked to look at.

Ultimately, he appeared to take refuge in the fact that, on whatever method used, light was lost and proceeded on that basis.

Whilst he accepted that it might only be the starting point, he stated that Waldram analysis has "stood the test of time" and declined to disregard it.

For now, at least, Waldram is here to stay.

2. Valuing light loss is hard – simple solutions are more attractive to the court

A significant amount of court time – and the judgment – was taken up with identifying how to value the light loss.  Beaumont's expert relied on the "radiance" method.  Florala's relied on more traditional methods.

It clearly weighed heavily in Florala's favour that its expert evidence was simpler.  The judge said as much and only needed to spend 1 page on considering it, rather than the 14 pages dedicated to Beaumont's evidence.

As only limited light losses were being caused, the judge found it very hard to agree that significant amounts of income had been lost as a result of interference with rights to light alone.

However, he accepted evidence from marketing agents that if a room feels less well lit, it is likely to be less attractive, so agreed that the reduction in light did cause, "at least to some extent" a reduction in rents received.

3. Bad window design does not help a guilty developer

Florala argued that Beaumont had designed bad windows that exacerbated the light loss, and a redesign could have helped them avoid losses.

The judge was not overly impressed with this point and even though he conceded that in some cases it might have some merit – as it had not been properly argued and pleaded in the case and the evidence was that it would have made little difference – he rejected the submission.

4. Injunction or Damages – It matters whether you really only want money

 The judge arrived at a figure of some £240,000 for damages that Beaumont had actually suffered.  He described the valuation as "laborious".

Although Florala had conceded that if they were liable, the damage caused was significant enough to give rise to an injunction – they argued that the timeline of the case showed that Beaumont only really wanted money.

The judge, after a long consideration of the evidence, rejected this submission.  He thought it was clear that Beaumont did want to protect their wider interests – not just achieve a ransom payment.

It is a timely reminder that, if a landowner wants to protect its rights to light, to object early and be as clear as possible in its negotiations that it really does want to protect its rights – and doesn’t just want money.

5. Profit Share Damages are attractive to judges

As an alternative to valuation based damages, its possible for the court to award "negotiating" damages based on the amount that might fairly have been negotiated as a price for allowing the infringement.

After considering the lengthy evidence over the various alterative schemes that could have been agreed in hypothetical negotiations, the judge decided that Florala gained at least £1.1m from building the hotel it built, against the maximum value of a hotel that could have been built respecting Beamont's right to light.  The judge then had to decide what price would have been paid for this profit.

Again, the judge fell back on well trodden paths and held that the figure of roughly 33% was appropriate (as had been established in the Tamares case from 2007).  As the figure of approximately   £350,000 compared well with the assessed valuation damages, the judge considered this an appropriate figure and in the circumstances. Although he was urged to consider that the Supreme Court had suggested that the award of such damages should be "rare" (see Coventry v Lawrence from 2014) he considered that it was the right measure of damages where an injunction was refused, as it was the price of a valuable property right.

6. Injunctions – behaviour matters

The judge finally decided that he should award an injunction.  He considered that Florala had declined to properly engage with overtures brought by Beaumont to scale back its development, and had proceeded at its own risk and in a "high handed or at least unfair or unneighbourly manner".  The judge clearly set store by the fact that the evidence showed that Florala had been advised that there was a litigation risk, but went ahead anyway.

On the basis of this case, it is clear that if a party is building a development that will infringe a neighbour's right to light; that neighbour objects and seeks discussions – but the developer presses ahead anyway – that developer will be at real risk of an injunction.

Conclusions – where are we now?

This is a conservative judgment – but not a developer friendly one.

The judge stuck, mostly, to established practice and on the whole, the conclusions he "felt right".

What is most relevant is the likely impact on insurance – the common method of rights to light risk mitigation.  Insurers will take note that:

  1. The developer refused to engage with an objection
  2. The court awarded an injunction
  3. The court considered "negotiating" damages based on profit share a fair compensation

This may well mean that insurers will place ever more emphasis on the need for "agreed conduct" provisions in insurance policies – that allow insured entities to negotiate with neighbours who object.

It also seems likely that insurers (and funders) will insist on seeing profit share analysis of the development proposed, in order to ensure that they have the full picture of the potential award for damages.

End

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