Rights of light: The fundamentals of damages

There have been a number of interesting articles in this publication recently about rights of light. We have heard from Jerome Webb about the introduction of the third edition of the RICS Rights of Light Professional Standard for England and Wales and from Mark Sefton as to why a compensation figure assessed by reference to a profit share might not be as high as developers fear. These are excellent developments and arguments. However, they do not deliver the clarity that both developers and neighbours seek. Following the protocol does not either guarantee or discount an injunction. And Mark Sefton’s compelling argument does not account for a ransom scenario where a neighbour secures an injunction in order to insist on a larger payout in excess of the number suggested by a formula based on a residual valuation. The questionable value of injunctions We know that in most of the successful rights of light injunction cases, including HXRUK II (CHC) Ltd v Heaney [2010] EWHC 2245 (Ch); [2010] 3 EGLR 15 in Leeds and Beaumont Business Centres Ltd v Florala Properties Ltd [2020] EWHC 550 (Ch); [2020] EGLR 20 in the City of London, the offending developments are still up. This means that the developer must have agreed settlement terms post-trial to persuade the successful neighbour not to enforce the injunction. Many more cases settle at the doors of the court. We do not know the terms on which these cases settled, for obvious reasons of confidentiality, coupled perhaps with concern that publicity will encourage further claims. It is well known that there are now a number of specialist firms that identify schemes and persuade likely impacted neighbours to instruct them to assert a claim on a no-win-no-fee basis. The general sense in the marketplace is that most claims can be bought off. It is simply a question of how much. In many other commercial (non-property) claims, the remedy available is limited to damages. Yet property rights, such as rights of light, have traditionally been afforded special protection with the remedy of an injunction. Is that distinction appropriate in this modern age, against the backdrop that most injunctions are not enforced but a money remedy is ultimately agreed between the parties? With this in mind, it might appear that in reality property rights are not so special after all. What the market needs is more clarity and more options. Moving with the times An arguably sluggish economy needs to be supported by development, and in the press we hear daily about the lack of new housing. So, we need judges to use their discretion as to whether to grant an injunction more boldly, really taking all the wider factors into account. In Lawrence and another v Coventry (t/a RDC Promotions) and others (No 2) [2014] UKSC 46; [2014] 3 EGLR 71, the Supreme Court urged a more flexible approach. Lord Neuberger said that one needs to consider carefully the public interest, for example whether there would be a loss of public facilities or services, or whether there would be a waste of resources “on account of what may be a single claimant”. This seems particularly relevant in this context, where there may be one last remaining neighbour. He also placed real weight on the existence of a planning permission: “This factor would have real force in cases where it was clear that the planning authority had been reasonably and fairly influenced by the public benefit of the activity, and where the activity cannot be carried out without causing the nuisance complained of.” We need a more contemporary and consistent body of case law that is fit for the modern age, leaving behind outdated notions that property rights should be afforded special protection. While section 203 of the Housing and Planning Act 2016 offers an alternative means of assessing the public interest, this is itself a flawed lengthy and uncertain process, vulnerable to local politics. We also need to dust down the recommendations made by the Law Commission when it consulted about reforming rights of light a decade ago. Its key recommendations were: A statutory notice procedure which would allow developers to require neighbours to tell them within a specified time if they intend to seek an injunction, or to lose the remedy. A clear statutory “injunction or damages” test. The Law Commission recommended that the court must not grant an injunction if that would be disproportionate, and when assessing this should consider any loss of amenity (but crucially taking into account the extent to which artificial light is relied on), whether damages would be adequate, any unreasonable delay in claiming an injunction, the impact of an injunction on the developer, and the public interest. A power for the Upper Tribunal (Lands Chamber) to discharge or modify rights to light, similar to the existing power to discharge or modify a restrictive covenant. Capping damages Perhaps the industry needs to lobby to ensure that these recommendations are finally implemented. Maybe we need to go even further and revisit the fundamentals of damages, with a cap on the maximum amount of damages, fixed at the value of the impacted property. A right of light is an easement which is appurtenant to an interest in the impacted property. It seems odd that compensation could exceed the value of the property interest itself. There is, of course, a fiction that damages by reference to a profit share is in fact compensation for “loss”, as the impacted neighbour has “lost” the ability to negotiate a release of their rights, and in that hypothetical negotiation would have demanded a profit share. But this concept does not work in practice, where there are complicated arguments about how any profit is to be apportioned between other impacted neighbours. Imposing a cap, coupled with a court direction that if an injunction is not enforced then it is automatically discharged and replaced with capped damages, would do much to provide clarity and really separate out those claims which are ultimately about money and those where the claimant genuinely wants to protect their light. Rashpal Soomal is a partner at Eversheds Sutherland Photo © Amel Majanovic/Unsplash