Ahead of what looks to be an encouraging year for the development industry, the Law Commission has provided a boost for developers with the publication of its final report and draft Bill on rights to light reform.
The review began in 2012, and publication of a consultation paper on the subject in 2013 drew more than 130 responses. The long-awaited report was finally published in December 2014 and contained a number of positive signs for developers.
The Commission made two key recommendations. The first was that there should be a new statutory test of 'proportionality' to allow courts to decide whether damages or an injunction (to halt the development or order its demolition) is the most suitable remedy. The aim is to ensure that an injunction is not disproportionate when assessed against a set of defined criteria; a sentiment set out in Coventry v Lawrence, where the Supreme Court ruled that judges should exercise 'judicial discretion' in the future. The new proportionality test refines this opinion, and will consider factors such as whether or not:
an injunction would impact too heavily on a developer
financial compensation would be adequate for the landowner instead
a development is in the public's interest.
The second significant change proposed is that neighbouring property owners must declare, within eight months of the developer serving a Notice of Proposed Obstruction, if they intend to seek an injunction to protect their right to light. If no claim for a right to light is brought within this period, landowners will lose their right to claim an injunction. A court would still be able to award damages after this date.
In addition to these two main changes, the Commission suggested a new simplified statutory procedure to prevent the acquisition of rights to light by prescription. Its proposal is to replace the cumbersome light obstruction notice procedure with a more straightforward local land charge registration process, the full details of which are, as yet, unknown.
The Commission also recommended extending the powers of the Lands Chamber to discharge or modify rights to light, and finally, it proposed that a right to light should be abandoned if it has not been enjoyed for five years.
Good news for developers
We believe these proposals will be well received by developers. They appear to have struck a balance between the interests of landowners and the law's recognition of the need for appropriate development, while also trying to remove some of the uncertainty.
The statutory test for injunction vs damages, while not removing or significantly reducing the risk for developers as such, will at least afford them the opportunity to draw up development plans that mitigate, as far as possible, the risk of an injunction.
Also, if approved, the eight month's statutory notice procedure will take away the uncertainty for developers over the risk of an injunction being sought by a neighbouring owner, where no reply is received. However, we suspect developers may only use the notice procedure as a last resort, because this is likely to alert potential claimants to the possibility of a light obstruction: as this still involves an eight month waiting period for neighbours to confirm their position, it will ultimately delay the development progressing.
The Law Commission anticipates an interim response from the Department for Communities and Local Government by May 2015. Then it is a case of waiting for whichever Government is in charge, post-General Election, to find parliamentary time to implement some or all of these proposals.
From an insurance perspective, the changes may mean that at some stage in the future, we will need to adjust our underwriting approach or indeed, our existing Rights to Light indemnity policy. Even if these changes are implemented however, it's looking likely that demand will still exist for insurance to cover the risk of action from property owners threatening injunction proceedings or a claim for damages. Until then therefore, it's business as usual.