Compensation for Loss of Light

Following a recent case in which a dispute regarding a property owner’s right to light was unexpectedly dealt with by the granting of an injunction against a developer, a more recent case has offered guidance on how much compensation might be payable by a developer, who takes the light of another property, in the more normal circumstance in which the court rules that compensation is payable.

The principles which will normally apply in assessing the damages payable are that they should be:

• fair – in other words, an amount such as would be likely to be agreed following negotiations between the interested parties;
• appropriate bearing in mind the context of the breach and its nature;
• made with the awareness of the strength of the bargaining position that is created by the right to claim injunctive relief, thus preventing or limiting a development, and the profit that thereby might accrue to the person able to claim the injunctive relief;
• based on a fair percentage of the anticipated size of the profit, but if the profit is not known, the appropriate measure is a suitable multiple based on the loss of amenity;
• not so large that the development would not have gone ahead had it been payable; and
• fitting in the circumstances, after taking into consideration all the other relevant factors.

In the case in point, the court awarded the applicant a sum estimated to be 30 per cent of the developer’s expected profits. If unchallenged, the practical implication of this case is that developers whose developments are likely to take the light of adjacent property owners should be aware that failing to negotiate a favourable position at the outset might lead to a considerable reduction in the development profit should the matter end up being decided in court.

In a more recent case, the court ordered that the builder of an office block must demolish the top two stories (part of which were already tenanted) because they took the light of a nearby listed building.This decision is currently under appeal.

In 2011, the Government announced it is to review of the law in this area.