Love thy neighbour: starting your development on the right foot

A viable tall building will need a myriad of rights over adjoining land. The hard graft of a planning application can seem the biggest obstacle to building up, but often the detailed work of addressing legal rights demands just as much resource and attention.

In the following article, we take a look at some of the key legal rights that may need to be considered when turning a potential development site into a viable scheme. Early consideration of such rights and engagement with third parties on issues arising can help prevent obstacles to delivery down the line.

The right stuff

Broadly a developer needs to consider two categories of legal right when formulating a strategy for a development:

1. Rights they have, or don’t already have but need; and
2. Rights they wish other people didn’t have.

The first step is therefore to assess the legal titles both to the developer’s land and to adjoining land so as to identify existing rights and covenants. This in turn can inform a strategy as to which neighbours need to be approached and what alternative options the developer might have.

Access denied

Obviously, establishing rights of way to the property is fundamental. Where the property abuts a public highway there may be limited scope for concern, but it is worth considering what other rights may be needed, particularly rights of escape. Lack of available fire escapes will severely hamper a building’s maximum allowable capacity and should be properly addressed at the design stage to avoid escape routes that cross third party land.

Rights of access or escape need to exist as legal easements rather than as licences or contractual rights, so that they are binding on successive owners without the need for further documentation.

Easements can be created in a variety of ways: the most obvious is by way of express deed, but they can also arise in certain situations without an express agreement, for example where a right of way has been exercised for many years (known as acquisition by prescription). Such easements are, however, likely to be of limited use for a new tall building as they do not permit intensification of use – for example a right of way acquired by prescription for use by the occupiers of a single storey building will not allow the volume of use required by a 50-storey building. Where a right is fundamental to the operation of a building, a developer would be well advised to ensure it is granted expressly for the sake of certainty. A funder is unlikely to want to rely on prescriptive easements.

Even if the registered title to a plot of land appears to benefit from all necessary legal easements, it is important to fully interrogate them to ensure they are fit for purpose. Easements can, for example, be limited in time or require payment of money as a quid pro quo for continued enjoyment – how does this impact on the proposed development?

More importantly an easement which was granted for a specific purpose or with a specific scope cannot be unilaterally extended nor the use intensified (as referred to above). Consider, for example, a development plot comprised of two registered titles. One of these titles (“Land A”) has a right of drainage over a third party’s adjoining land (“Land B”) – so far so good. However, the new building will require drainage for the whole site, including land within a separate title (“Land C”) and Land C does not have a right of drainage over Land B. The right of drainage that Land A has cannot be extended unilaterally. It is irrelevant that the owner of Land A and Land C are the same. Accordingly, even though it looks at first glance like the development site has sufficient rights, on closer inspection it becomes clear that it does not – an additional right will need to be negotiated.

Licence to drill

In addition to the above, the developer must consider what rights are needed in order to actually build the property. Here it is unlikely that fully blown legal easements would be proportionate and it may be more sensible to enter into licences with adjoining owners. It is important to remember that, legally, a freeholder’s title to property extends both below the ground and into the sky – so rights may need to be agreed for more than initially anticipated.

The developer needs to consider whether any of the following require a third party’s consent:

1. Scaffolding;
2. Temporary rights of access;
3. Crane oversailing; or
4. Excavation works.

When drafting the licences it is important that any funder’s rights are protected. It is quite likely that the licences will have termination provisions for breach but a funder will want to have notice of that breach before termination and the right to step in and remedy the same before the licence actually falls away. Further, the developer should make sure that any adjoining freeholder actually has the right to grant the licences it purports to have, rather than any tenant.

The price is wrong

Just as important is dealing with those rights of third parties that may affect the construction or operation of the development site. Rights of light are the most obvious of these, but what about any rights of way or drainage rights that a third party has over the development land? Interfering with a third party’s easement creates a potentially actionable claim – one that may result in an injunction that stops building work while matters are resolved or, in the worst case scenario, permanently.

Consideration should be given as to whether rights that burden the development land are likely to be released through agreement, or whether insurance should be sought against those rights being enforced. Clearly, negotiating the release of a right generally comes at a cost which will need to be factored into the scheme viability assessment. A word of warning: the above analysis should take place before any third parties are in fact approached, as doing so may make insurance impossible to obtain.

Love thy neighbour

Dealing with third party rights and releases can be costly and time consuming and are worth considering early. The likelihood is that any rights which are missing from the title will need to be created by express deed, which means negotiation with adjoining land owners. A long term building project will bring a developer into close and regular discussion with their neighbours and opening up clear channels of communication early can help build a positive relationship and smooth progress, including at the planning stage. In addition a clean legal title with sufficient rights will make it easier to obtain funding and attract the tenants that will ultimately drive the success of the building itself.

If new rights or release of existing rights cannot be obtained, and insurance isn’t available to cover the risk, then amendments to the scheme design may be required. As a last resort, arrangements can be entered into with local authorities whereby they acquire land for planning purposes and grant an interest back to the developer – any development for those purposes by successors in title to the authority will not be actionable even if third party rights are infringed. Further, it is possible for land and rights to be acquired through a compulsory purchase power. However, the use of such powers is complex and frequently controversial and requires careful analysis.

This article was written by Sarah Morley and Mark White. For more information please contact Sarah on sarah.morley@crsblaw.com or +44 (0)20 7427 6417.