Light at the end of the tunnel?

Developers will be used to hearing complaints from neighbouring residents or businesses every time plans for a new development are lodged, but their responses to these will vary widely. While some might believe that complaints alleging infringements on right to light come at the bottom of the priorities list, those who proceed with intended works believing disgruntled neighbours can be persuaded with monetary offers risk substantial loss and unlimited hassle. On numerous occasions, the courts have been forced to intervene and exercise their power, with consequences many businesses did not anticipate.

A court’s power to dispense with such problematic situations exists in the form of a prohibitory injunction to prevent nuisances and trespasses. Alternatively, the court may grant a mandatory injunction requiring the demolition of offending premises. However, in the case of retaining discretion to award damages instead of an injunction, a court will consider two key factors; the seriousness of injury to the victim and whether any objection had been raised to the relevant works.

Past decisions have helped cultivate the court’s reluctance to grant injunctions, creating an untouchable attitude within the development community. This was encapsulated in 2005 when a freeholder and tenant were refused an injunction by the High Court, its reasons including; the tenant always used artificial light, the freeholder’s sole interest in the premises was as an investor, the freeholder’s plans for redevelopment might render the loss of light academic, the freeholder and the tenant both unreasonably rejected approaches from the developer to fully negotiate and the grant of an injunction was oppressive as the development was considered worthwhile.

However the case of Regan in 2006, opinion soon changed. After obtaining expert evidence supporting his objections to the development of a neighbouring property, the court accepted Regan’s lounge would have a 20 per cent reduction in light. However, the injury to Regan’s maisonette was only about 2.5 percent of its value compared to the developers’, whose loss would be around £150,00 if they could not proceed with the works plus additional building costs of around £35,000. The court refrained from making an injunction, stating Regan could be adequately compensated by a small monetary payment and that granting an injunction would be widely oppressive.

The Court of Appeal overturned that decision, declining the assumption of damages being the preferred option in right of light cases. Instead, the court found it was not oppressive to grant an injunction preventing works and commented that the developer had no room to complain in vain of the adverse consequences having taken a calculated risk in proceeding with the works.

Left with the concern of potential untold uncertainty, the recent case of HXRUK II (CHC) Ltd v Heaney dealt a further damaging blow to developers. In 2007, a commercial property was purchased for £18.75m with the benefit of a planning permission for redevelopment and extension, including the building of two additional floors. The price paid included a negotiated reduction of £350,000 to allow for claims in respect of interference with the right to light.

After failing to reach amicable resolution to an ongoing dispute with Heaney and following completion of substantial works which commenced in June 2008, proceedings were issued in the summer of 2009 by the developer hoping to secure confidence and guarantee his position. It was claimed Heaney had lost his right to a remedy by failing to issue proceedings to prevent the works and in the alternative, that the injury was so small a mandatory injunction would be oppressive.

After abandoning the first element of the case, it was left for the High Court to decide whether an injunction should be ordered resulting in the development being demolished or whether an award of damages would be more appropriate. It should be noted that part of the development had been occupied by a firm of accountants when legal proceedings took effect.

The court refused to characterise Heaney’s injury as small despite the loss of adequately lit space being less than 1% of the net lettable area of the building, equating to £80,000, only 2% of the £4m value of the building. While such comparisons had to be taken into account, as did the fact that good light was relatively more important in a person’s home than in industrial or commercial premises, those findings did not repel a determination that Heney’s injury was more than insignificant.

The infringement was viewed as having been committed without necessity but with a view to profit. It was noted the work could have been completed at reduced dimensions, even though this would have reduced profit levels. Accordingly, the court felt it wrong to sanction such unwarranted behaviour by compelling Heaney to accept monetary compensation which he did not want. Accordingly, a mandatory injunction was granted requiring the removal of the completed works.

In passing further comment, the court offered a useful explanation as to the assessment of damages had that measure been appropriate. Effectively, they form the amount based on the figure that the party suffering injury, could have demanded in a hypothetical negotiation between the parties. Applying to Heaney’s case, the hypothetical negotiation would have included the £350,000 reduction obtained on the purchase price, plus the fact a budget of £200,000 had been allocated by the developer in anticipation of such dispute. An increase above £200,000 could have been expected given the much larger price reduction, but only a slight increase based on Heaney’s evident reluctance to start proceedings through fear of financial consequences, thus meaning it was unlikely he would push negotiations with any real vigour. Accordingly, the appropriate figure calculated would have been £225,000.

To avoid the possibility of their trophy development being demolished, developers are warned to resolve any potential claims before commencing work. Those considering a purchase of new premises, providing finance for development or leasing a new building must ensure the absence of any disputes which could lead to unimaginable expense or inconvenience. Similarly, with a growing number of developers being left with surplus units, turning their hands to becoming landlords, many may find themselves open to a whole range of legal disputes – both as a landlord and developer.