- Law Commission Report on Rights to Light
- January 9, 2015
- Law Firm: Dentons Canada LLP - Toronto Office
The Law Commission (the Commission) has published its much anticipated report following its 2013 consultation on rights to light. The report is considered and detailed and makes a number of key recommendations that will impact on this fundamental issue of law for developers, adjoining owners, surveyors and solicitors.
Rights to light has accelerated to the top of developers' key concerns when considering a potential development. In light of Regan v. Paul  Civ 1391 and HKRUK II (CHC) Limited v. Heaney EWHC 2245 (Ch), rights to light suddenly evolved from something that could be dealt with by exchange of a reasonable sum of money to something that was preventing development from occurring, due either to the real risk of injunction or else the threat of damages based on a percentage of development profit arising from the offending part of the scheme (based on Tamares (Vincent Square) Limited v. Fairpoint Properties (Vincent Square) Limited  EWHC 212 (Ch)). Factor into the mix a deep economic recession impacting on the development industry and the scene was set for a clamour for reform to prevent an easement of light holding up a development scheme, especially in heavily developed urban areas.
The Commission undertook a wide consultation exercise on proposals that it had drawn up and a considerable number of responses were received, including from the Property Litigation Association (the detailed submission being principally prepared by the author of this bulletin on behalf of the PLA). The report published on 4 December 2014 makes recommendations based on the consultation exercise.
In summary, the Commission is recommending:
- The continuation of the acquisition of rights to light by prescription. The Commission originally proposed prospective abolition of prescriptive rights to light. It has now stepped back from this. Instead, reform of prescription will be proposed in order to streamline the unsatisfactory three methods of acquiring prescriptive rights.
- Repealing the Rights of Light Act 1959. This is where the "Light Obstruction Notice" process has its current home. The Commission instead proposes a "Certificate of Light Interruption". This involves a registration at the Local Land Charges Register of a Certificate of Light Interruption. Upon registration the light is automatically interrupted. The advantages of this process are that there is no need to serve notice on adjoining freeholders and tenants and that the interruption is immediate and does not take effect only after a one-year period. The Certificate will have no impact on rights that exist already, so a registering owner intending to develop will need to exercise care in ensuring that registration occurs only against adjoining owners in the process of acquiring 20 years' enjoyment. If not, then the Certificate is of no effect. The analysis of adjoining owners' rights or rights in the process of acquisition therefore remains a crucial exercise.
- No statutory objective measure for light. The Colls v. Home and Colonial Stores Limited  UKHL 1 test remains. Therefore an infringement will only occur where an obstruction results in there being less light than normally required for the ordinary purposes for which a particular building can be used. This will therefore account for differing uses such as residential, studio, office or industrial. The Commission wishes to retain the flexibility of the current arrangements and the onus remains on rights to light professionals to advise their clients as to whether or not an obstruction constitutes an obstruction for any specific building.
- A new statutory test to address the issue of where damages should be awarded instead of an injunction. This issue more than any other caused concern and consternation amongst developers and led to development stalemate in certain cases where the risk of development infringing a right to light prevented viable development. Regan and Heaney represented the high watermark of the strict interpretation of the principles in Shelfer v. City of London Electric Lighting Company  1 Ch 287. This was however criticised at the highest level in the Supreme Court by Lord Neuberger in Coventry v. Lawrence  UKSC 13, a case about noise nuisance, but one that could have been written with rights to light firmly in mind. The Commission essentially expands upon the proportionality and public interest focus referred to in Coventry. The Commission is proposing that an injunction should not be granted where it would be disproportionate. The court should consider a number of factors in reaching a decision on this, including:
- the claimant's interest in the dominant land;
- the loss of amenity arising from the infringement - this can account for artificial light where it is relied upon;
- whether damages would be adequate compensation;
- the conduct of both claimant and defendant;
- whether the claimant delayed in seeking an injunction;
- the impact of an injunction on the defendant; and
- the public interest.
- The Commission is not recommending change in the measure of damages that should be awarded instead of an injunction. Therefore, the Tamares-type development profit damages are to remain, meaning that adjoining owners whose rights are infringed are entitled to a share of the profits arising from that part of the development scheme that infringes the light enjoyed by the adjoining owner. This is likely to be controversial in view of the potentially significant payouts to be made and to whom and in what proportion they are to be made. This is likely to remain an area ripe for dispute. However, a developer should at least be able to account for such costs in a development budget and also account for a greater prospect of the development taking place in light of the proposed statutory test for whether damages should be awarded in lieu of injunction. A potential purchaser of a development site should have greater awareness of the rights to light risk and can negotiate the price accordingly.
- A "Notice of Proposed Obstruction" procedure. The purpose of this is to flush out any claims to an injunction that an adjoining owner may have at an early stage. This avoids the extremely concerning aspect of Heaney, where an injunction was obtained after the development had occurred and following a reasonable amount of discussion and negotiation between the developer and the adjoining owner. Therefore, in principle, the notice procedure is to be welcomed in mitigating the Heaney situation. The notice will not extinguish existing rights to light. However, unless the adjoining owner responds within a period of up to eight months by applying for an injunction, it will not subsequently be entitled to an injunction. Instead, the adjoining owner's remedy will lie solely in damages. This procedure is likely to accelerate any claim for an injunction that is to be brought. This is double-edged. It will flush out an injunction claim early on. However, it may lead to an adjoining owner issuing the injunction claim in order to maximise its negotiating position in respect of any compensation to be paid. The upside for the developer at this point is that it will be aware of who is entitled to obtain an injunction out of the parties that have been served notice. The downside is potential litigation early on in the development life cycle, attendant publicity and greater awareness from other adjoining owners of the scheme and any position they may have against the developer in respect of it. The Commission is also proposing that the developer also be liable for the surveying and legal costs of the adjoining owner in ascertaining its position following service of a notice. This will result in up-front costs being incurred in respect of any notice served. In practice, a developer will usually cover the costs of adjoining owners that it negotiates with in order to obtain a release of rights. Therefore, whilst the proposals will likely add to the developer's budget, they may not do so to a significant extent if the intention is to negotiate deals with the affected adjoining owners.
- An easement of light will be considered to be abandoned if the light is not enjoyed for five years. For example, the bricking up of a window for five years would be sufficient to demonstrate an intention to abandon the right.
- The Lands Chamber has the power to modify or discharge rights to light. The Commission is not however proposing to extend the existing section 84 Law of Property Act 1925 grounds for obtaining a discharge or release of the easement. Therefore, the impact of this proposal is likely to be limited.
As a package of proposals, the Commission's report is to be welcomed. It is of note that the Commission has stepped back from recommending abolition of the prospective acquisition of rights to light - one of the most significant proposals in its original consultation.
The report is a reflection of the state of development post Regan and Heaney and the economic circumstances existing. Developers have now had time to adjust to the darker rights to light landscape. Rights to light have become fundamental to investors, developers and funders, but as a consequence of increased enlightenment of this complex area of law more effective decision-making has been made to work around the challenging problems that exist. Ultimately it is not known how many schemes were actually scuppered as a result of a failure to deal with a rights to light issue. In the vast majority of cases money is likely to talk and a scheme can be unlocked. The proposals from the Commission are not of themselves revolutionary, but they will increase certainty and should result in a smoother and swifter resolution of rights to light disputes. Complementing the Supreme Court's approach in Coventry v. Lawrence, whilst recognising the starting point that a claimant's primary entitlement is to an injunction, the proposals do swing the pendulum more towards damages in lieu and away from the award of an injunction. This should recognise the commercial reality where rights to light are a major issue - namely in urbanised commercial centres. In such circumstances there are good reasons on proportionality grounds for damages to be the appropriate remedy.
Coventry v. Lawrence is a helpful sticking plaster. The Commission's proposals do go further in their specific rights to light focus. However, at present they are only proposals. Whether and when they will see the light of day on the statute book remains to seen.