Why Buy Rights of Light Insurance?
Michael Grimwood
Insurance Broker | Real Estate Transactions - Legal, Planning, Environmental Risk
Rights of Light is often referred to many in the industry as the "Dark Arts". The calculation of light loss is certainly complex, but the reason the calculations are carried out is to understand the risk and perhaps the requirements for insurance.
Rights of Light insurance is a risk transfer mechanism which allows stakeholders to put a specific number on to the balance sheet during the early stages. When building tall structures you must consider how the scheme will interfere with the neighbouring properties and their ability to receive light. They may seek to claim compensation from the developer, or seek to derail the development entirely in court.
Without the insurance in place, the developers may look at the surveyors budgets for guidance, however there is no certainty the compensation would be accepted in the event of a claim and an injunction may be served. This is why rights of light surveyors work so closely with insurers and brokers throughout the process.
Now there may come a time (or a court case) which changes the perception of ROL, but in todays market funders respect insurance as the default solution to the problem.
Is insurance perceived as a grudge purchase for most, probably, but it works, it's accepted as standard practice and it allows developers to get on a do what they do best. Build...
My job as an insurance broker is to ensure that even if it is a "grudge purchase" that it will be bought at a competitive price. The cover responds appropriately in the event of a claim, and the insurer has a strong rating.
Some fun facts:
- Rights of Light policies do not have an end date.
- Claims have been known on occasion to occur several years after a building has been completed.
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- Rights of light surveys are not the same as daylight/sunlight assessments carried out for a planning permission.
- There are some businesses who now have teams ready and waiting to demand compensation when a new structure is being built near their properties as it's virtually an additional revenue stream.
- a Rights of light quotation from first contact to binding cover can span over many years due to the timelines of development.
If you or your clients are planning to built a scheme that will impact neighbouring properties. Consider engaging with the insurance industry as early as possible to optimise your position and save capital. Once a claimant comes forward, the price of insurance will only go up and/or the coverage will reduce as a result impacting profit margins.
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