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Rights of landowners in development schemes

Developers can experience issues when constructing developments if adjacent landowner’s rights are not fully considered.  Developers will normally consider whether there are any restrictive covenants preventing development or any other rights that will be affected.

The primary weapon available to the landowner to prevent the development is normally to obtain an injunction, either to stop the development starting or to reinstate the works completed so far and go back to the previous position.

The rights of the landowner are powerful.  In the case of HKRUK II (CHC) Limited v Heaney (2010), the developer erected two further floors to a building of commercial office premises in the centre of Leeds.  The effect of the new floors was to adversely affect the amount of light going into a nearby building (formerly a bank) but was now used as offices and a conference facility.  This was a breach to the right of light to Mr. Heaney’s building.

Although some previous cases (e.g. the Midtown case relating to interference with rights to lights) had indicated that the courts would allow developers to get away with the interference, provided they paid the correct amount of compensation to the landowner, in this case the court took a strict view of the interference and ordered the developer to reinstate the works creating the new floors instead of awarding damages.

The court applied a four stage test derived from the case of Shelfer v City of London Electric Lighting Co. This provided that an injunction would be ordered unless:

  • The injury to the claimant is small.
  • It is capable of being estimated in money.
  • It can be adequately compensated by a small money payment.
  • It would be oppressive to grant an injunction.

If those four tests were satisfied then the court could award damages instead of ordering an injunction.

The outcome in Heaney was an extremely painful and expensive lesson for the developer.  It also gave a clear warning to developers not to interfere with landowner’s rights and not to recklessly assume that money will sort things out. 

Coventry v Lawrence

Earlier this year the Supreme Court clarified the circumstances in which courts will and will not grant an injunction.  The case related to noise which had been emanating from a speedway and motocross track and whether this was a nuisance and should be stopped by an injunction. 

The leading judgment from Lord Neuberger showed that there were no fixed rules and the issue of an injunction is completely at the discretion of the court.  He said that the court’s previous, almost mechanical application of the four tests in the Shelfer case and an approach which involves damages being awarded only in very exceptional circumstances, is simply wrong in principle. Shelfer was described as “out of date”. 

The guidance

  • If a right has been interfered with then an injunction should be the prima facie remedy.
  • The burden is on the defendant/developer to show why an injunction should not be granted.
  • In the absence of other specific circumstances it would normally be right to refuse an injunction if all four limbs of the Shelfer test were satisfied.
  • Even if all four of the limbs are not satisfied this does not mean that an injunction should be granted automatically.

The court also considered issues relating to the public interest and whether planning permission had been granted for the proposed use of the land. Appropriate planning permission should provide strong support for the argument that the activity is for the public benefit.

The quantum of damages in lieu of an injunction

Without giving a firm decision Lord Neuberger gave an indication that as the effect of awarding damages instead of an injunction provided a permanent benefit to the developer, an assessment based on the benefit to the developer could be appropriate. He did not discuss whether that assessment should include the claimant being entitled to recover the amount of profit the developer would realise as a result of the lack of an injunction but did refer to cases where the claimant recovered the cost of negotiating a release of the rights owned by the landowner.  This issue will need to be developed in future cases.

Conclusion

What is clear is that the court is not restrained in exercising its discretion to award damages instead of an injunction depending on the circumstances.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.