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No blues for the Blues on rights to light

There was much fanfare when Chelsea Football Club secured planning permission for redevelopment of Stamford Bridge last year.  However, one family’s fight against the new stadium’s impact on its right to light had the potential to bring the redevelopment to a standstill.  Hogan Lovells’ Planning and Development specialists, Hannah Quarterman and Paul Tonkin consider the implications of rights to light on development, and how even a goliath-like Chelsea FC can become unstuck at the hands of a local family

When the Club secured permission for the state-of-the-art stadium it knew that the new stadium would potentially infringe rights of light enjoyed by neighbouring owners. This is by no means an unusual situation and Chelsea, like other developers, tried to negotiate financial deals to release the rights in return for cash.

In most cases, this strategy succeeds and it appears to have worked for Chelsea in the case of all of its neighbours other than the Crosthwaites.

Developers seeking to negotiate away rights of light should, though, be aware that ultimately adjoining owners can seek an injunction from the court to prevent the development. Whilst the court has a discretion over whether to grant an injunction (and it is a broad discretion) the legal position remains that an injunction is the primary remedy for infringement of property rights (including rights of light). An adjoining owner armed with an injunction is a formidable opponent indeed, as Chelsea have no doubt discovered.

So, what can developers do to minimise the risk?

The first stage is to get the strategy right. The once-favoured approach of “hoping to get away with it” will not find favour with the courts and developers must be open and reasonable in their dealings with affected neighbours. Developers are also increasingly looking at flexible insurance cover for rights of light claims, which enables them to negotiate whilst providing a financial payout if those negotiations stumble. However, whilst insurance may compensate for losses, it will not get a scheme built in the face of an injunction.

Using local authority powers may also be an option. For Chelsea, the London Borough of Hammersmith and Fulham may be its knight in shining armour. It has resolved to exercise statutory powers which would enable Chelsea to continue with the development, notwithstanding the interference with the relevant rights.

Section 203 of the Housing and Planning Act 2016 permits developments to be carried out even though they would interfere with third party rights.  The party with the benefit of those rights can no longer secure an injunction but, instead, has a right to statutory compensation for the loss in value to their property caused by the interference.

In order to benefit from these provisions:

• there must be planning permission for any relevant building work;

• the work must be carried out on land which has been held by the Council;

• the Council must show that they could acquire the land compulsorily for the purposes of those works; and

• the work must be for purposes related to the reasons for which the land was acquired.

In Chelsea’s case, the Council has never owned the land and so a lease and leaseback arrangement is needed, so that Chelsea can derive title from the Council, and benefit from the relevant power.

The process is further complicated, as an LPA cannot acquire land willy-nilly and must do so for a particular purpose, complying with the relevant tests for that acquisition. The stadium land is to be acquired for planning, so the Council had to demonstrate that the acquisition would promote the improvement of the economic, social or environmental wellbeing of its area and that the redevelopment would justify interference with private rights.  Whilst it may seem obvious that a housing development would meet those tests, there is more of a question mark over a football stadium.  Nonetheless, the Council has concluded that redevelopment of the stadium would deliver significant benefits, not only for its area, but for London generally, and has resolved to follow the process to allow Chelsea to complete its redevelopment.

But the story may not end there.  The Crosthwaites have already made it clear that they don’t think the tests have been satisfied, and that they will challenge the Council’s decision to follow this process.

All this serves as a timely reminder that any potential infringement of rights to light should be addressed early on to avoid scoring an own goal in your development timetable.