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Right to light claims have become a very hot topic in recent months, with
important developments in the law. In particular, most attention has
focused on Regan [2006] where a residential occupier succeeded in
getting an injunction against a neighbouring developer, even though it
meant part of the development had to be demolished.
The offending part
of the development reduced the value of the claimant’s property by a
mere £5,500, whereas the loss faced by the developer was £175,000;
despite that, damages were not awarded and instead there was a
mandatory order for demolition. As such, it is seen as a significant case,
which shows an important shift of emphasis – with an increased
willingness to grant an injunction (not damages) against an offending
developer.
But, if damages are to be awarded, how should they be assessed?
Surprisingly, this is a topic on which there seems to have been only one
previously reported High Court case! Now, however, we have a case in
which clear guidelines are given – and they also reflect an approach that
favours the claimant. The case involved a loss of light to some windows
leading to a basement in a commercial building, with the actual loss in
value being assessed at a mere £3,030. What should the damages be?
The judge decided (not surprisingly) that he should adopt the same
principle for assessing damages with interference of right of light as would
be the case in a claim for breach of a restrictive covenant or obstruction
of a right of way. This is generally done on the basis of the amount that
would have been arrived at in negotiations between the parties, had each
been making reasonable use of their respective bargaining positions,
without holding out for unreasonable amounts (Amec [1966]). This involves
the judge deciding how the parties would have negotiated, and then
deciding whether the suggested figure ‘feels right’. Normally this will mean
looking at the profit that would have been made by the developer, and the
strength of the claimant’s bargaining position. Thus damages will be
awarded relative to the likely size of the profit made by the developer, but
the award should be based on a fair percentage of that profit – but not so
large that the developer would not have agreed to have paid that much.
The key point, however, is that it is the size of the developer’s potential
profit, rather than the loss of right by the claimant, that is the most
relevant factor. In the judge’s view, one-third of the profits would be
appropriate compensation and would accord with common sense in a
normal case; that would be a reasonable share which would not have put
the developer off proceeding with the development. In this case, the judge
took a halfway figure between the two figures in the expert’s reports and
came to £58,000; he then reduced that to £50,000 and asked ‘does that
feel right’? In his view, £50,000 might have been substantially more than
any damages that could be awarded for loss of amenity, but in terms of
the price for avoiding an injunction it did ‘feel right’.
Clearly, two points emerged. Firstly, damages will normally be assessed
on the basis of lost profit (not the value of the lost amenity). Secondly,
in a ‘normal’ case one can think in terms of one-third of the developer’s
profit. Note that the ‘one-third approach’ is also often used by the Lands
Tribunal in compulsory purchase case.
As an aside, it is worth remembering that a right of light (or, indeed, a
restrictive covenant) can be used as a way of allowing a landowner to secure a share of future development value when he sells off part of a
property. Normally, of course, this is done through complex overage
arrangements, but one possibility is to simply retain a right of light (or a
restrictive covenant). By doing that, the seller can secure an indirect
means of ensuring that he secures a significant share (one-third?) of the
future development value of the land that is being sold. Tamares v
Fairpoint Properties [2007] EWHC 212 (Ch). Source: www.practicallaw.com
(subscription service).
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