In December 2014, the Law Commission published its final report on rights to light (Law Com no 356), including draft legislation: the Rights to Light (Injunctions) Bill. The report examines the problems that disputes present for developers and landowners, including legal expense, uncertainty and potential delay to development. The recommendations address the imbalance in the law affecting all parties in a dispute and constitute a welcome step towards increased transparency in the process while encouraging engagement at a much earlier stage.
Key proposals
While still retaining an equitable balance between development in the public interest and protection of a neighbour’s rights to light, two key changes to the existing law are proposed in the draft bill.
The first addresses the threat of injunction as the primary solution to an infringement of a right to light. It proposes a new statutory test of proportionality specific to rights to light and recommends that a court should not grant an injunction if it is considered to be disproportionate when assessed against a set of fixed criteria. The test of proportionality acknowledges that there may be other relevant aspects in addition to the impact on light, such as the public benefit of a development and the conduct of the parties involved.
The second significant change is the notice of proposed obstruction (NPO) procedure, which allows a developer to put a neighbour on notice where there is an expectation of an obstruction to the light to their property. The affected party is then required to commence proceedings to apply for an injunction within eight months of the notice being issued. If they fail to take any action, they will lose the right to claim an injunction and will only be able to claim for damages.
Proactive conduct
The insurance market has always considered the conduct of a developer to be essential to underwriting a risk. Recent judicial decisions, followed by the Law Commission’s report, only serve to reinforce this position. The most significant cases were HXRUK II (CHC) Ltd v Heaney [2010] EWHC 2245 (Ch); [2010] 3 EGLR 15 and Lawrence v Coventry (t/a RDC Promotions) [2014] UKSC 13; [2014] 1 EGLR 147. These have affected the way in which underwriters view the rights to light market and have led to many insurers now offering greater flexibility by tailoring the insurance specifically around claims management and proactive negotiation strategies.
Traditionally, rights to light insurance carried policy conditions preventing policyholders approaching any parties that held an interest in the insured’s affected properties. With the new wave of insurance options, policyholders should be able to be proactive and approach affected parties with a view to gaining a release of the rights, while maintaining the security that traditional insurance provides.
The tailored nature of rights to light insurance means that if a claim occurs the insured can handle the claims notification themselves – with the insurer’s agreement and within set limits and conditions. It would also protect the developer from the catastrophic risk of an injunction, providing a financial safety net as well.
Early cover
The benefits of considering insurance at an early stage cannot be overstated. All too often, brokers and insurers are approached late in the day when all other avenues have been explored and an urgent solution is required to satisfy a potential buyer or lender. While this will inevitably remain the case in many situations, the use of insurance as a last resort does not allow the full exploitation of its benefits.
Rights to light insurance has evolved to such an extent that although a rights to light objection may have been made, or an attempt made to engage with neighbours, this does not automatically preclude insurance from being a viable option in these situations. Insurers are now more willing to work with developers in order to provide solutions that suit their specific requirements rather than simply dictating what can and cannot be achieved.
It is worth noting, however, that despite the increased flexibility offered by some insurers, the ultimate decision regarding whether insurance cover is available will still be at the underwriter’s discretion and determined on a case-by-case basis.
Complementary role
The move towards insurance actively promoting good conduct from developers and allowing community engagement has been happening for some time, and insurers are alive to the fact that a court will not look favourably on a developer that has used insurance to ride roughshod over its neighbour’s rights. The proposed statutory test of proportionality and NPO procedure will help to redress the perceived imbalance of an injunction being awarded by a court. This move will be welcomed by both the insurance community and developers alike.
If Lawrence and the subsequent Law Commission report are seen to highlight the importance of good conduct, then insurance will continue to have a very important role to play in managing rights to light risks and complementing a proactive negotiation strategy.
Fraser Pratt is an insurance broker at Willis and Dean Perkin is an associate partner at GIA
