Rights of light – What is happening and how it affects you
Rashpal Soomal, partner at Eversheds Sutherland and William Densham, partner at Eversheds Sutherland
There is an increasing trend towards litigation in the rights of light arena. In March 2020 the case of Beaumont v Florala ended in an injunction, forcing the developer to cutback its newly constructed hotel, which reduced light to the claimant’s neighbouring serviced office building. More recently other cases have made their way through the courts, only to settle on the first day of trial. A claim against the M&G owned Wells House in Oxford Street (heard under case name Sirosa v Prudential), settled in November 2022 and a claim brought by the Estate Office against the HB Reavis owned site at Worship Square, Shoreditch (heard under case name Adjoin v Fortytwo House Sarl), settled in May 2023. Other cases are making their way through the courts.
There are a number of reasons for this trend. The first is heightened awareness. Some high profile rights of light cases have been picked up by the mainstream press. Another reason is the increasing prevalence of opportunistic surveying practices that actively identify new developments and bring claims. These are often brought on a no-win-no-fee basis, where the claimant does not need to pay for legal costs if the claim is unsuccessful.
Litigation thrives where there is uncertainty and rights of light cases have uncertainty in terms of both the technical tests and the legal arguments.
On the technical tests, there is uncertainty over whether the current Waldram method of analysis, which dates back to the 1920s, is appropriate. Waldram is based on light received directly from the sky at table top height in the room, but many believe other factors should be taken into account, e.g. reflected light, sunlight or seasonal variations.
Another difficult technical area is transferred rights. This refers to the concept of a demolished building being replaced with a new building where rights are said to “transfer” if new apertures overlap to some extent with old apertures. The cases are old and talk about “cones of light” which simply does not match the way light loss is measured, and says nothing about how to account for changing floor levels or changes in plane or axis.
The theme continues with uncertainty on the legal arguments in key areas. The most important is around cumulative impacts, where two schemes are coming forward that each impact a common neighbour. This is key in areas undergoing rapid development e.g. Vauxhall, Canary Wharf, Victoria. These raise the question of how the injuries are to be apportioned. The second scheme will face a worse baseline as the neighbour will already be worse lit following the first scheme. The limited caselaw (essentially a 1932 case called Sheffield Masonic) states that it is not “first over the line”. Modelling the various scenarios and insuring on an appropriate basis, is not straightforward. Other areas of legal uncertainty include whether and how certain provisions in old deeds, such as a reservation of a “right to build”, bind successors.
What this means in practice is a hardening insurance market. Policies are more expensive (both in terms of premiums – what is paid for the policy – and excesses – the initial amount paid by an insured on each claim before the insurer pays out) and we are seeing an increase in group excesses rather than individual excesses per impacted building. In most cases insurers request cutbacks and profit share numbers to sense check any budgets set by the surveyors, as these are normally based on a market methodology called “book values” rather than a profit share. It is not uncommon to see a policy where the combined excess and premium is equivalent to (or in some cases, more than) the surveyor’s budgets.
The insurance market is also getting smaller, with one underwriter exiting the market at the moment, and others looking mainly to underwrite perceived “simpler” schemes. For higher value policies with a large maximum for insurance coverage, brokers are having to work hard to layer a number of policies to achieve the required level of cover.
We are also seeing changes in how insurers handle claims. Previously there was a sense that an insurer would never ask a developer to down tools, absent an actual injunction prohibiting works. But this has been called into question by perceived market behaviour, for example the cranes on the Wells House scheme were dismantled before any injunction was secured. A developer would need to check any policy wording to see who bears the costs of such action.
For a developer facing an aggressive rights of light claim, getting the right technical and legal advice will be key, in order to harness any uncertainty rather than suffer from it.