Whose light is it anyway? Releasing rights of light reaches the High Court
Unlike any other easement a right to receive light can be acquired by a tenant independently of its landlord and, in certain cases, against its own landlord. This provides an additional layer of complexity for developers seeking to mitigate their rights of light risk. A recent decision of the High Court has provided a rare insight into the relationship between landlords and their tenants in this context. Before looking at the detail of the decision a brief reminder on rights of light generally might be helpful to set the scene.
How do rights of light arise?
Rights of light generally arise as a result of long use or enjoyment. This is known as prescription. A prescriptive right may arise if the person claiming the benefit can show twenty years enjoyment of light through a window in their building. There are, however, three different forms of prescription each with particular requirements to be satisfied. Only one form of prescription can be claimed by tenants in their own right – statutory prescription under Section 3 of the Prescription Act 1832. This makes it difficult to determine whether a right has arisen and, if so, on what basis. Prescriptive rights are not registered at the Land Registry and so their existence must be determined by detailed research.
To determine whether a window enjoys a right over neighbouring land you must first identify when it first started receiving light over the development site. It is then necessary to consider the titles to the neighbouring land and the development site to ascertain if there are any historic agreements that might prevent a right from arising. It is only once this research has been carried out, and advice taken from specialist surveyors and lawyers, that it will be possible to assess whether a right of light exists which might impact on the proposed development.
Who has the benefit?
Once it has been established that rights exist the next question is who can claim the benefit. This will be important if the developer plans to try and negotiate a release of any rights which affect their development. In most dense urban environments buildings are unlikely to be owner occupied. Therefore, there can be a variety of occupiers and often several layers of leases. The developer must consider the terms of all relevant leases to consider who they must deal with. This is far from straightforward and requires further legal and historical research. Key points to understand are: what rights might have existed at the date each of the leases were granted; whether those rights were passed to the tenant on the grant of the lease; and whether the tenant might have acquired its own prescriptive right.
Ideally the developer wants to deal with just one party but unfortunately in a multi-let building the freeholder might not be in a position to enter into a release binding on all of the tenants. In practice, if there is any doubt, the freeholder will be reluctant to provide the necessary indemnity to the developer for any claims which might be made by its tenants.
Some help from the High Court?
On 24 October 2017 Mr Justice Morgan handed down his decision in case of Metropolitan Housing Trust Limited v RMC FH Co Limited . The facts were relatively simple. RMC was the freehold owner of a property on Royal Mint Street in London of which Metropolitan owned a head-lease. The building had been built by Metropolitan shortly after the grant of its head-lease in 1987. The windows in the building had enjoyed light passing over a neighbouring property for more than twenty years and so, at face value, had acquired a prescriptive right to light. The neighbouring property was in the process of being developed and the question for the Court was whether Metropolitan as tenant was in a position to grant a release of the right.
Mr Justice Morgan grappled with the legal basis of statutory prescription under Section 3 of the Prescription Act 1832. Whilst acknowledging that the enjoyment of light had been by Metropolitan, or its sub-tenants, and not by RMC, he found that the right of light which had been acquired as a result of that enjoyment attached to RMC’s freehold interest. This could be seen as a surprising result given that tenants are able to acquire prescriptive rights of light of their own and independently of their landlord.
Mr Justice Morgan did go on to say that the benefit of the right was then passed back to Metropolitan as a result of the terms of its head-lease. However, and importantly, this did not allow Metropolitan to grant a release to the developer. The head-lease contained a covenant not to allow any encroachment on the demised premises. On this basis Mr Justice Morgan decided that by entering into a release which allowed an encroachment to the light received by the demised premises over the development site, Metropolitan would be in breach of the non-encroachment covenant.
What does this mean in practice?
Whilst of considerable academic interest to practitioners, the decision does provide some concern for developers. Each case will, of course, turn on the results of detailed historic analysis and the terms of any relevant leases. However, developers will need to be more wary than ever as to the position of tenants in the buildings neighbouring their sites before finalising a strategy to mitigate their rights of light risk.
This article was written by James Souter and Emma Humphreys. For more information please contact James on +44 (0)20 7427 6716 or email@example.com or Emma on +44 (0)20 7203 5326 or firstname.lastname@example.org
News & Insights
GDPR in the spotlight: lessons learnt one year in
Join us as we take stock of the effects of GDPR, identify some key trends in compliance and start to predict the longer term impact.
Rich pickings for HMRC? The new UK tax rules on “property-rich companies”
The scope of UK tax for non-residents has been extended to catch gains on disposals of interests in “property-rich companies”.