The Price of Light: Can Section 203 Offer Developers a Brighter Future?

In the complex world of property development, one often-overlooked obstacle can cast a long shadow: rights of light. This legal right grants neighbouring properties access to natural light, and any significant obstruction can have costly consequences.

This article aims to shed a little light on the risks that rights of light can pose to developers, their potential impact on property value, strategies to mitigate these challenges and  – in particular – how section 203 Housing and Planning Act 2016 can help de-risk development and ensure timely delivery.

Understanding the Risks

Legal Hurdles: If a development casts excessive shadows on a neighbouring property, exceeding established thresholds, the neighbouring owner can initiate legal action seeking an injunction to halt construction or, if fully built, demanding that the scheme is either partially or fully demolished. This can lead to significant delays, financial losses, and potentially a form of ransom negotiation to agree a release of the right. This can be costly and is often assessed of a portion of the profit gain of the area of the development that infringes the right to light.

Design Constraints: To mitigate the risk of rights of light infringement, developers may be forced to adopt design modifications that compromise their initial vision. This could involve reducing building heights, altering floor plans, or incorporating light wells, all of which can impact the project’s functionality, aesthetics, and marketability.

Increased Costs: Addressing rights of light concerns often necessitates additional expenses. Indemnity insurance policies, engaging in negotiations with affected neighbours and potentially redesigning elements of the project all contribute to a rise in development costs.

Uncertainty and Delays: The complexities of navigating rights of light issues can introduce significant uncertainty into the development process. Negotiations with neighbours, potential legal proceedings, and the need for design modifications can lead to unpredictable delays, impacting project timelines and potentially affecting financing arrangements.

Valuation Impact: Lenders may be wary of financing projects with unresolved rights of light issues due to the associated risks and potential delays, making it challenging for developers to secure funding. Further, buyers or investors aware of potential rights of light concerns may be reticent (or unable) to purchase the development or individual units (such as flats in a residential block), if there is a risk of or an issued injunction. Both leading to a decreased market value and delay in receipts being received by a developer to meet construction and financing costs.

Mitigating the Risks

While rights of light pose significant challenges, developers can employ various strategies to mitigate these risks, including:

Early Assessments: Conducting thorough rights of light assessments at the initial stages of planning can help identify potential issues early on, allowing for adjustments in the design or proactive engagement with neighbours (where appropriate).

Seeking Expert Advice: Consulting with specialists in rights of light can provide valuable guidance on navigating complex legal and technical aspects, helping developers make informed decisions and minimise risks. Alongside rights of lights surveyors and lawyers, it is important to instruct an expert valuer to give a range of potential damages and/or compensation that might be appropriate in order to inform viability and feasibility of the scheme (and any negotiations with neighbouring properties).

Section 203 of the Housing and Planning Act 2016 (“Section 203”): In certain circumstances, developers can utilise Section 203 to override rights of light. This section empowers specific bodies to override certain easements and restrictions over land for planning purposes.

Section 203 of the Housing and Planning Act 2016

It is crucial to note that utilising Section 203 is a complex process and numerous factors should be considered.

Applicability: Section 203 only applies to land with planning permission that is owned by (or vested in) qualifying authorities, such as local councils. However, qualifying authorities can appropriate land for these planning purposes to support private developers, for instance, in bringing forward beneficial schemes.

Public Interest Justification: the land must have been appropriated for the purposes of the scheme and the power can only be used where the appropriating body could acquire the land compulsorily for the purposes of the development. Consequently, the authority must demonstrate a compelling public interest justification for overriding rights of light using section 203. This typically involves demonstrating the project’s significant benefits to the community, such as providing much-needed affordable housing or regenerating a neglected area.

Legal Challenges: The use of Section 203 can be challenged in court by affected parties, potentially leading to legal battles and further delays. Although there is no clear guidance or procedure for utilising and justifying the use of Section 203, it is advisable to progress a CPO lite – running through similar steps as would be required when promoting a compulsory purchase order to ensure that objectors are dealt with fairly and the qualifying authority has undertaken a robust process.

Compensation Requirements: Even when applicable, developers must compensate affected parties due to the infringement of their rights of light. However, the possibility of the claimant applying for an injunction to halt or alter the scheme is overridden. Consequently, compensation is based on the loss in value to the claimant’s property (taking into account any positive impact on value resulting from the development scheme), not on a portion of the development profit. This is a very different assessment (and usually much less costly).

Therefore, while Section 203 offers a powerful tool to mitigate the risk of schemes infringing rights of light, there are important considerations to ensure that it is utilised correctly and there will still be compensation payable. Consulting with legal and rights of right and valuation surveyors is crucial to assess the feasibility and potential implications of utilising this approach and employing it correctly.

Conclusion

Rights of light remain a significant consideration for developers, demanding careful planning, proactive risk management, and effective communication. By understanding the potential pitfalls, implementing appropriate mitigation strategies, and exploring avenues like Section 203 (with due diligence and expert guidance), developers can navigate these challenges and ensure their projects proceed smoothly while safeguarding their investments.

Ardent has a team of specialist valuers that can assess injunction-related damages, ransom valuations and compensation under Section 203 to support developers and local authorities in understanding the risks and costs of schemes they are promoting. Please do get in contact if you’d like to discuss further.