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Goldman Sachs’ new HQ survives rights to light scare

7 January 2015

Following the Supreme Court’s decision in Coventry v Lawrence last year there have been many heated debates between developers and adjoining owners as to the proper approach to the calculation of damages for the infringement of a right to light. It is perhaps unfortunate that we have not yet seen a case in the higher courts to provide clarity.

The Law Commission’s proposals for reform of the law relating to rights to light were published on 4 December 2014 but they will require Parliamentary time and a political will before becoming law. With a general election pending this is unlikely to happen for some time and there is no guarantee it will happen at all.

The most recent high profile bust-up relates to the development of Goldman Sachs’ new headquarters in London. The site which is just to the north of their current London home on Fleet Street is under demolition.

The consented scheme comprises almost a million square feet of office space but was hit by difficulties with two adjoining owners with whom Goldmans were unable to reach agreement to release their rights to light.

The dispute

The two adjoining owners both refused compensation offers of £1.2 million. As a result, Goldmans asked the City Corporation to step in and use its powers to acquire the land for planning purposes which would have effectively allowed them to override the neighbours’ rights to light once they had re-acquired an interest from the City.

The use of these powers removes the threat of an injunction and limits the compensation payable by reference to the statutory method for compulsory purchase.

However, as part of the deal with the City, Goldmans had agreed to honour the offers of £1.2m for each of the adjoining owners even if the powers were invoked. The adjoining owners argued that they should be entitled to a share of the profits from the development.

In contrast, Goldmans valued their settlement offers by reference to the loss of amenity to the adjoining properties enhanced by a multiplier.

Approach to damages

The share of profits or 'negotiating damages' approach is widely used in practice by the specialist surveyors who advise on the release of rights to light. Goldmans argued it was not appropriate in this particular case and sought support from the City.

The proposal came before the City’s Planning and Transportation Committee on 23 September 2014, but, consideration was postponed pending receipt of further information from the parties.

The Committee appeared cautious and was keen to understand that Goldmans had made every attempt to settle on an appropriate basis. The clear indication was that the powers would only be considered as a last resort.

The matter was due back before the Committee on 11 November 2014 but that was postponed as negotiations with the adjoining owners were on-going. Although not widely reported, it is understood that agreement was reached early last month.

The terms of settlement are not within the public realm but they are almost certain to have been significantly in excess of the last reported offers of £1.2m.

How will this affect developers in the future?

This case simply serves to demonstrate the uncertainty that remains in relation to rights to light. This is an area of the law crying out for guidance from the Courts or Parliament.

Until the Law Commission's proposals reach the statute book, or we see a case in the Supreme Court, uncertainty will remain for developers and adjoining owners alike.

It is interesting to note that whilst the Law Commission’s paper includes some radical proposals in relation to the availability of injunctions in these cases, they do not recommend any change to the approach to damages or the use of compulsory purchase powers.

This article was written by James Souter.

For more information please contact James on +44 (0)20 7427 6716 or james.souter@crsblaw.com.