Rights That Stifle Development: Reform May Be On the Way

Developers beware! The rights of the landowner can dramatically delay a successful development or even stop it in its tracks. Magdalene Haywood offers light at the end of the tunnel but urges caution in the meantime.

Property developers often encounter the situation where they identify a site ripe for development only for their legal advisors to caution against proceeding until rights that are found to burden the land for the benefit of other landowners are neutralised. Rights of way and rights of light are commonly encountered. Land Registry figures suggest that at least 65% of freehold titles are subject to one or more rights, making the extent of the problem facing developers all too clear.

Recent case law does not assist, rather it serves as a warning to developers. Two cases heard within a month of each other in 2006 illustrate the problem.

The first concerned the infringement of a right of light to two windows illuminating a basement staircase of an empty building. When assessing the appropriate level of damages the judge used as a starting point one third of the developer’s profit for the relevant part of the development. It was accepted that "in a real-world situation" the stairs could be properly lit by electric light and the infringement was "trivial". Nevertheless the owners of the empty building walked away with £50,000.

In the second case, the judge ordered that a newly constructed penthouse flat in Brighton be cut back as it interfered with the light to the living room of a maisonette in the apartment block opposite. The developers had taken a calculated risk by continuing with the construction of the penthouse even though the owner of the maisonette had complained. The reduction in size of the penthouse obviously had an impact on value, which when added to the costs of demolition and modification amounted to over £200,000.

So the stakes are high. Where the owner of a right can be identified, the only safe course of action is to negotiate its release.

It might be thought that a right that has not been used for a considerable time can be ignored. Not so. Whilst rights can be acquired relatively easily, often following uninterrupted use for upwards of 20 years, it is a reflection of the need for reform in this area of law that the converse is not the case. Even rights that have not been used for 65 years, or even in one case 175 years, have been held to be effective and capable of being enforced.

Title indemnity insurance may be an option if the owner of a disused right cannot be found but it can be difficult and costly to obtain. It may also be unacceptable to end users of a development or their funders. Also, whilst the Lands Tribunal has jurisdiction to vary or release some covenants affecting land (though the process is both lengthy and costly) it has no jurisdiction over rights that burden land.

The inflexibility of the law in this area cries out for reform. Fortunately the Law Commission agrees. A consultation paper issued in March 2008 is set to be followed by recommendations for reform and a draft Bill in the spring of 2011.

It is likely the Law Commission will recommend that an unregistered right that has not been exercised for a specified period (possibly 20 years) should be presumed abandoned. In addition, it will propose the extension of the jurisdiction of the Lands Tribunal to modify or discharge rights on the application of the burdened landowner. These are two relatively simple changes that could make the difference to a site being developed or not.

Whether the Coalition will ultimately support this reform, requiring parliamentary time and significant investment in the Lands Tribunal in this time of austerity, remains to be seen. In the meantime, developers should follow the advice of their legal advisors when a proposed development will interfere with the legal right of another landowner. To do otherwise could be very costly indeed.