Let there be light!

Metropolitan Housing Trust Limited v RMC FH Co Limited (Case No. HC-2017-000740) [ 2017 ] EWHC 2609 (Ch) High Court of Justice – Chancery Division

The Defendant in this case was the head lessee of a building (the “Building“) comprising residential apartments, which themselves were let under long leases. A new development (the “Development“) was proposed opposite the Building. The head lessee wanted to enter into an agreement with the developer to consent to the Development and release its rights of light over the Development.

The freeholder objected, relying on covenants in the headlease, which the Defendant claimed did not apply.

After examining the specific terms of the various covenants, the High Court held that the Defendant would be breaching the terms of its headlease if it entered into the agreement with the developer in the form suggested.

The facts

The Defendant enjoyed a head lease for a term of 127.5 years from 6 March 1987 at a yearly rent of £1. The Claimant was the current freeholder. The Building itself comprises 20 flats, all let under long leases and granted at a premium.

Directly opposite the Building was a development site and planning permission had been obtained for the construction of a mixed-use development comprising residential apartments, serviced apartments, a hotel, retail, leisure etc. The development had already commenced.

It appears that when the head lease was granted to the Defendant, there were no rights of light enjoyed by the Building over the development site. However, during the course of the term of the head lease, such rights had been acquired by prescription.

The case centred over various covenants in the headlease, the main one being clause 3(12) which read as follows:

3 (12) Encroachment Not to give permission for any new window light opening doorway path passage drain 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 the Landlord and in case any 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 the Landlord and at the request and cost of the Landlord 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.

Considering that clause, the freeholder argued that by entering into the release of its rights of light, the head lessee was permitting an encroachment against the demised premises which might be or grow to the damage, annoyance or inconvenience of the freeholder and that further, the head lessee was required at the request and cost of the freeholder to prevent such encroachment and that could include bringing proceedings to prevent the interference.

The first issue was who benefitted from the prescriptive right to light. The freeholder argued that the easement of light which was acquired after the date of the lease attached to the freehold and then was treated as being subject to the demise to the head lessee.

The head lessee did not accept that its right of light acquired by prescription after the date of the head lease formed part of the defined demised premises. If that was correct, then the clause would not apply as it only related to an encroachment against the demised premises. Furthermore, any such encroachment would not “be or grow to the damage, annoyance or inconvenience“ of the freeholder.

There was no direct authority for this point, although by analogy, the freeholder relied on the principle that applies in adverse possession cases where the lessee is taken as having taken possession of such land for the benefit of the freeholder and that after the relevant period of time, the land becomes part of the demised premises and reverts to the freeholder when the lease expires. In the event, the High Court agreed with the freeholder’s submission and thereby created new law on the point.

In respect of the creation of the new windows in the Development, the freeholder claimed that the owners of the new development might in due course acquire a right of light from the Building which could grow to the damage, annoyance or inconvenience of the freeholder. For that reason, the head lessee should not give permission to the opening of those new windows as it would be in breach of clause 3(12). The Defendant disagreed with the freeholder’s position in all respects.

However, the Judge agreed with the freeholder that the erection of the Building on the development site would be an encroachment and that permission for such interference would be in breach of clause 3(12).

The last question was whether the freeholder could require the tenant to take action depended on whether such actions were “reasonably required or deemed proper“. The Judge made the distinction between a genuine attempt to prevent the development and a tactical step in order to obtain compensation. If it were the latter, then it may not be caught by the covenants. As it happens, there is no evidence on this point and so the Judge was unable to make a decision.

Our comments

Both the freeholder and the head lessee had fairly distant interests bearing in mind all of the flats had been let for at least 100 years. Nevertheless, it demonstrates that there is still value in such interests where rights of light are being infringed. This case has made it clear that any rights that are acquired during the course of such leases are also acquired for the benefit of the freehold. It seems likely that the lessee will be forced to share any compensation with the freeholder as a result of this decision.