Floor could disappear under you if you deny a neighbour’s right to light

The message

Developers should not proceed without resolving right of light claims by neighbours.

The case

In the first important reported case involving a completed commercial scheme, the court has had to decide whether an injunction should be granted to prevent interference with an adjoining owner’s rights of light or whether damages would be an adequate remedy (HKRUK II (CHC) v Heaney, 03.09.10).

HKRUK, a subsidiary of Highcross, bought the building, now known as Toronto Square, in Leeds in December 2007 for £18.75m. It proposed a scheme that included the reconstruction of the fifth floor and the addition of a sixth and seventh floor. Heaney, the defendant, had purchased the adjoining building in 2003. It was the former headquarters of the Yorkshire Penny Bank, and the defendant said he had spent around £3m in restoring it as offices.

HKRUK appreciated that its development of the upper floors would interfere with the light enjoyed by the defendant’s building. In September 2008, HKRUK offered the defendant compensation of some £20,000 plus costs, but this was unacceptable. Solicitors for the Defendant then wrote in November 2008 to ask for an undertaking that the development would not interfere with the defendant’s right of light.

HKRUK decided to proceed with the development while negotiations continued. It clearly anticipated reaching some agreement with Heaney and work on the construction of the upper floors commenced in September 2008. It was well under way by the time the defendant’s solicitors came on the scene.

Correspondence between solicitors continued from November 2008 until February 2009 with the defendant taking no steps to seek an injunction to prevent the worksproceeding. The works were completed by July 2009 with the total cost of the project coming to nearly £36m, including the acquisition and finance costs.

HKRUK let the seventh floor from 1 August 2009 but, to allow other lettings to proceed, started proceedings to obtain confirmation that the defendant’s only remedy wasdamages and it could not demand any changes to the development. In the proceedings, it was estimated that any required alterations would cost £1m-£2.5m and would require the occupiers of the seventh floor to vacate.

In the case of Regan v Paul Properties (2007), the court had made clear that an injunction to require demolition or alterations to a building could be awarded, even if the adjoining owner had not sought any injunction to restrain interference with its right of light while works proceeded. That case involved a domestic property and HKRUK argued that interference with light to a commercial property was not as serious and, in its estimation, the effect was small and related to less than 1% of the total square footage of the defendant’s building.

Case law has established that the burden is on the developer to establish that an injunction should not be granted to restrain interference with a neighbouring property. It can do so if it can establish that any injury caused is small, compensation can be clearly estimated, a small payment would adequately compensate the injured party and it would be oppressive for an injunction to be granted.

Unfortunately for HKRUK, the court held that neither the injury, nor the compensatory payment, would be small. There would be substantial interference to some important areas of the defendant’s building, and that the amount HKRUK would have to pay to buy out the defendant’s rights was assessed at £225,000.

Although the defendant delayed taking action and the effect of an injunction would be very costly for HKRUK, the court recognised that it had proceeded despite knowing that
it was infringing the defendant’s rights and did so at its own risk.

It thought it would be wrong for it to compel the defendant to accept damages, which he did not want, in relation to a building he had invested heavily in.

HKRUK now has to carry out major alterations or reach an agreement with the defendant. This would now involve a very substantial payment indeed.

Jonathan Ross is head of property litigation at Forsters

Summing up: HKRUK v Heaney
HKRUK’s scheme blocked Heaney’s light.
The firm then sought to prevent an injunction.
HKRUK wanted to pay damages instead, as an injunction would mean changing its building.
The court gave the injunction. It said Heaney shouldn’t have to take damages he didn’t want.