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28th July 2016

Important Consideration for Developers in light of Recent Case Law

When a developer seeks to promote a site for development, it tends to focus its efforts on lobbying the relevant local authority and seeking to create contractual relationships with the owners of the land that they seek to develop.

As part of this process quite frequently, neighbouring land owners are left to voice their concerns during their planning process by raising objections and joining lobbying campaign groups.  Whilst they have the option to challenge permissions once they are granted, that option itself is only open to them for a short period of time and in itself, can be a fairly lengthy and expensive process which neighbouring land owners struggle to undertake especially when challenging the stronger financial and influential position of developers.

Such a situation can lead to a general frustration for the neighbouring land owners who feel their voices are being ignored.

In Ottercraft Ltd v Scandia Care Limited (1) and Rahimain (2) this approach has been sharply brought to the fore.  This case has challenged the approach a developer can adopt and forced developers to consider the way and manner in which they deal with neighbouring land owners.  In particular it emphasises the need for good faith when a developer deals with neighbouring land owners and further emphasises the need to ensure that, developers deal fairly with the neighbouring land owner’s rights – in this case amongst other, the impact on rights of light.

A developer had commenced construction of a development of an investment property to create a ground floor café with residential flats above it.  There was also as part of this a storeroom in the yard which would be situated extremely close to the kitchen of the neighbouring property and would therefore obstruct light to three windows.  In addition there was an external (outside) staircase being constructed.  

The work specification:

  • would have necessitated the need for planning and other regulatory permissions;
  • would have necessitated the need to serve Party Wall Act notices; and
  • were such that they would cast a shadow over neighbouring land leading to a relatively small loss of light to that land for which consent would need to be obtained.

The developer elected to proceed with the development without attending to any of these issues notwithstanding subsequent concerns raised by the neighbouring land owner and notwithstanding the various assurances it made to the land owner to comfort them that their rights would not be infringed as a result of the works.

It is at this point that the land owner took court action against the developer and was awarded an injunction requiring the  developer to remove the staircase.

The Court took the view that although the actual loss of light to the neighbouring land was minor, the approach that the developer adopted in dealing with the land owner was reprehensible.  

1. The developer in an effort to circumvent the party wall obligations, encouraged their surveyors to suggest to the neighbouring land owner that there was no need to serve party wall notices  - when in fact it was later proved, that a notice should have been served for the staircase;

2. The actual assurances made to the land owner were not honoured when in fact had the developer elected to do so it could have easily honoured them. , The developer could  have avoided the infringement of the rights of light and air by spending an extra sum of £6,000; and

3. In reality when assessed by valuers, the infringement to the land owner of his right to light was not so substantial that it could not be compensated by the developer making a financial payment to the land owner.  The actual potential damages when assessed were in the region of £886.

However the Courts took the approach that after making the assurances to the land owner, the developer’s subsequent disregard of those assurances could be treated as being in bad faith and deceitful and that therefore a breach of these was not dissimilar in nature to a flagrant breach by the developer of an interim court order. The breach could therefore be treated as sufficiently serious that a financial award to the land owner would not be sufficient and that the only correct and satisfactory solution should be to grant an injunction.  This decision has now been upheld at the Court of Appeal.  

The result of this case demonstrates that a developer’s dealings with neighbouring land owners are fundamental and capable of being examined by the Courts in detail if the matter becomes contentious.  Therefore in dealing with neighbouring land owners, developers must demonstrate good faith by being fair and equitable even though there may not be a traditional contractual obligation to do this.  

Importantly this is something that developers must consider before commencing development and they can no longer assume that even where traditionally an issue may have been capable of resolution by making financial payments after the act by way of reparation to the neighbouring land owner, that this is in fact what they will have the option to do if it reaches the Courts.  

For a savvy developer this means that in order to assess a site and before commencing a development, the developer should in addition to the usual title, ground conditions, contractual and planning matters also consider the ongoing impact to neighbouring land owners and seek to harbour good relations with them. The alternative is that they will risk the ire of the Courts and suffer the vastly more expensive costs associated with being injuncted and their development stalled or subject to removal.

For further information contact Bela Zavery on  0207 400 5032 or click here to email Bela.

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