Rights of light: a tenant couldn't release its rights

The recent case of Metropolitan Housing Trust v RMC FH Co Ltd has been much discussed in the legal press, because it raises an interesting question as to when one party can stop another exercising its right to light – or, stop them giving that right away.

The facts of the case are straightforward:

• RMC is the freeholder and Metropolitan the headlessee of premises that include a block of 20 residential flats known as 1-20 Royal Mint Street, London (the "Block").
• Planning permission was obtained by the owners of a development site directly opposite the Block.
• Both parties agreed that the windows in the north elevation of the Block enjoyed a right of light gained through prescription (as the Block had been constructed by Metropolitan more than 20 years previously), and that the development would give rise to an actionable interference with that right.

Metropolitan sought a declaration that it was entitled to release its right of light in exchange for compensation from the developers.

The terms of the head lease

The reason for the proceedings was clause 3(12) of the headlease:

"Not to give permission for any new window […] or other encroachment to be made nor to permit any easement to be acquired upon or against the demised premises which might be or grow to the damage annoyance or inconvenience of [RMC] and in any case such encroachment or easement shall be made or attempted to be made or acquired or attempted to be acquired to give immediate notice in writing to [RMC] and at the request and cost of [RMC] to adopt such means as may be reasonably required or deemed proper for preventing the making of such encroachment or the acquisition of such easement."

RMC argued that any interference (such as the 'selling off') of the rights of light by Metropolitan would constitute an 'encroachment' under cl.3(12), because the prescriptive right of light was appurtenant to the freehold interest, and was therefore to be treated as part of the demise under the lease – not as an interest enjoyed solely by Metropolitan.

The decision: the court agreed with RMC

The headlease did not specify that the 'demised premises' was just the land itself – so it would include any rights enjoyed by Metropolitan.

The court applied, by analogy, the law relating to adverse possession – which states that where a tenant successfully makes a claim that it is entitled to land belonging to a third party, that additional land is incorporated into the lease demise. Although the judge initially referred to previous cases quoting that the doctrine is "somewhat obscure and confused" and "tangled", he was persuaded to follow this analysis meaning that any additional easement acquired by the tenant (for example, a right to light) would also be incorporated into the subject of the demise – rather than there being two rights of light, one appurtenant to the freehold and one to the leasehold. This meant that any release agreed by Metropolitan would result in a release of the right appurtenant to the freehold.

In considering whether the interference with RMC's right of light would constitute an 'encroachment', the court considered whether there needed to be a physical entry onto the land. Deciding that there didn't, it was then logical to confirm that in releasing the right of light, Metropolitan would effectively be granting the developer permission to interfere with a right that formed part of the demise – and that right was therefore not Metropolitan's to give away.

Such an encroachment would be potentially damaging to RMC, because the lengthy interruption between the right of light being 'sold off' by Metropolitan now and RMC retaking possession of the premises at the end of the term of the lease could mean that RMC's opportunity to seek redress against the developer for interference with RMC's right of light (as freeholder) would be diminished or destroyed.

The court therefore refused to grant the declaration permitting Metropolitan to release any right of light appurtenant to the headlease.

Preventing interference

The headlease obliged Metropolitan “at the request and cost of the landlord to adopt such means as may be reasonably required” to prevent encroachments. The court therefore considered whether RMC could require Metropolitan to issue proceedings against the developer, to restrain any interference with the right of light, or to require Metropolitan to enforce similar covenants on the part of its undertenants in their underleases.

Whilst the judge was not required to make a finding on these points, he suggested that Metropolitan's case would be weaker if the affected windows were in flats demised to undertenants in occupation because Metropolitan would only have an interest in possession lasting five days – the matter would depend on the benefits and detriments to both parties.

In particular, RMC's motivation in seeking to require Metropolitan to take action would be important, as the court would need to consider whether it was seeking to safeguard its right of light or merely to safeguard its own opportunity to benefit, by improving its ability to negotiate a payment from the developer.

What next?

It is worth noting that the proceedings were brought using CPR Part 8 i.e. that there was only a narrow legal issue in dispute, and the judge felt that he did not have sufficient evidence to consider many of the points that could have been in issue – for example, which windows were affected and how, the terms of any occupational underleases or any evidence about RMC's current or future wishes in respect of enjoyment (or otherwise) of the rights of light.

The case is potentially significant for developers and adjoining owners. At face value, the boilerplate “Encroachment” clause in leases can:

1. Prevent a leasehold owner releasing rights of light. If so, then it opens the door for a distant reversioner landlord to stymie development or demand a ransom to permit the same.
2. Allow a landlord to compel its tenants to prevent neighbouring buildings acquiring a right of light. This in turn can mean the spectre of light obstruction notices ("LONs"), potentially incurring vast costs for those tenants.

We often mitigate 1 by obtaining a permission from the freeholder to obtain releases from its tenants. The good news is that the court says this permission is unnecessary if the freeholder has already given a release. But that doesn’t address a situation –as was the case here – where the freeholder is a distant reversioner holding out for excessive sums, refusing a release altogether, or who a developer might intend to ignore (and e.g. instead insure against).

It would be interesting to see whether an appellate court might find otherwise than this decision. Watch this space!