Developers naturally just want to get on with building work to realise a return on their investment. Any delays, particularly if there is any an element of finance involved, can seriously eat into their profit margins.
One cause of delays, and what can be a real thorn in the side of developers, is claims for right of light by neighbouring property owners. This can either bring developments to a grinding halt or threaten the size of the scheme, which in turn is likely to hit the bottom line.
Quite often the courts, assuming a right of light is established, have erred on the side of injunctive relief i.e. preventing the proposed development, or worse pulling it down if work is already underway, rather than compensating the neighbouring property owner in damages.
However, in the recent case of Coventry and others v Lawrence and another (2014) UKSC 13 Lord Neuberger has ruled that the courts have been applying the basic test of whether there should be an injunction or damages too strictly.
The basic test was set out in Shelfer v City of London Electric Lighting Co (1895). The case provided that the court should, instead of providing an injunction, award damages if all of the following criteria are met:
- The injury to the neighbouring property owner’s legal rights is small;
- This injury can be estimated in money
- The injury can be adequately compensated by a payment of a small amount of money;
- It would be oppressive to the developer to grant an injunction.
Unfortunately for developers the courts have been granting injunctions if any one of the above criteria is not met. Although in fairness to the courts this is what the test provided.
Lord Neuberger in the Coventry and other case has ruled that the courts should not be following this test rigidly so that the courts can exercise discretion.
Is this a green light?
So, is this a green light to crack on with developments regardless to any neighbouring rights of light and without seeking to come to an amicable agreement?
I would suggest not. As is usual, each case will turn on its own facts and Lord Neuberger did acknowledge that the starting position is that an injunction should be granted and that it is up to the developer to prove that damages would be more appropriate.
Does the case help developers?
Yes it does. It certainly means neighbouring property owners with right of light cannot automatically assume they will obtain an injunction. It gives developers more ammunition to avoid an injunction being obtained.
However, it would be better to use this ammunition as part of negotiations before matters end up in court. Whilst this is more often than not the commercially sensible option to take, as it is likely to save time and money, it is also far less risky than taking your chances in court.
If an agreement cannot be reached, developers need to give serious consideration to applying to court for a declaration that damages should be awarded instead of an injunction. Some developers may see this as extra expense they could avoid. However, it could be a very risky strategy to start building works without an agreement or court declaration, as you could end up on the wrong side of an injunction which will be more expensive and ultimately could unravel any works already done at yet further expense.
For further information on developers and injunctions please contact our Dispute Resolution team on 0161 475 7676.