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In early 2019, we were contacted by solicitors acting on behalf of a developer, who was buying a retail unit in Cheltenham. Planning permission had been granted to demolish the existing building and replace it with a new retail unit and restaurant on the ground floor, and residential flats on the upper floors. The intention was to build the flats above a small lane running between two properties that was subject to a right of way which benefitted the neighbouring property, a small grocer. While the existing passageway would remain unobstructed at ground level, the construction of the new flats would permanently limit the height of the right of way, so the solicitor was seeking an obstruction of rights policy, to deal with any future disputes caused by the works.

Our underwriting team established that no third party had raised any objections during the planning process. We also obtained confirmation that no works were intended to reduce the width of the right of way, and that the proposed height of the passage would continue to allow deliveries to be made by vans. With these positives in mind, we were happy to provide cover for £800 with a policy limit of £1m.  

A nasty surprise

In December 2021, we were notified by our policyholder that a potential dispute had arisen, after they had received a letter from solicitors representing the neighbouring property owners. By this time, work had already started on the site covered by our policy, with the old retail units having been demolished, and the new foundations about to be dug.

The letter outlined concerns with the proposed development - specifically that the construction of the flats over the right of way would make it impossible to get high-sided delivery vehicles down the existing passage way between the two properties. It went on to inform our policyholder that their client, whose property had the benefit of the right of way, would waive all rights to full height access for £75,000. The policyholder was surprised to receive this demand out of the blue, as nothing about potential problems with deliveries had been raised during the planning application stage.

Deciding the best approach

As with all claims that we receive on development sites, our primary aim is to ensure that the development can be completed as it was originally intended. With this in mind, the first step that our claims team took was to assess exactly what had taken place since the policy had been issued. It transpired that there had been brief communication between the developer and the owners of the neighbouring property in early 2020. The issue of height and delivery lorries having access across the passageway had been mentioned, but nothing more had been heard for almost two years. The team reviewed the available title information, which included reference to a 1987 deed which contained the right of way. It stipulated that it was “10 feet 5 inches”, which specifically related to the width of the passage only, no mention of the height was included.

An additional complication arose with this particular case. Not only were the neighbouring property owners making a claim against the obstruction of rights policy that we had issued, they were also making a separate claim, for the same property, against a rights to light policy provided by another insurer. Conscious that it was going to be difficult to negotiate a solution as the two issues were intrinsically linked, we appointed lawyers to act on behalf of the insured.

Weighing the options

Seeking a resolution proved difficult. The neighbouring property owners appeared to have a strong legal case and there was genuine concern that if the case went to court, an injunction could be awarded for the infringement of their rights, and block the development altogether. Various legal arguments were considered to defend our policyholder’s plans. One proposal centred on the planned height of the right of way after the development, which was set at 2.8m. It had become clear during our investigations that vehicles larger than this hadn’t been using the right of way to make deliveries. Indeed, as our underwriters had found during their initial assessment of the enquiry, due to the restricted nature of the existing right of way, deliveries were generally made in vans, and usually made using a parking bay at the front of the building.

Ultimately, attempting to argue this in court would have been difficult and it quickly became apparent to us that seeking a financial resolution offered the best route to resolving the claim. The starting point for this was with the original complaint letter, which had set out a figure (£75,000) that was purported to be acceptable for the release of the right of way altogether. With this in mind, we appointed surveyors on behalf of the insured to assess the value of the site, both with and without the first-floor housing obstructing the passageway, to accurately assess their opening offer.

Offer…and counter-offer

Arriving on an agreed value for the right of way wasn’t straightforward either. Having received the results from our surveyor, there was clearly some difference in the valuation of the site, compared with those figures used to reach the proposed settlement figure. For this reason, our claims team made an initial offer of £43,000. In response to this, the neighbour came back with a counter figure of £125,000 – some £50,000 higher than the original figure quoted. Several months of tense negotiations followed, before all sides finally agreed to settle on a final figure of £70,000, plus legal costs, for the neighbour to release all rights to the full height of the right of way. Altogether, the total paid out for the claim was £81,400.

The rights of light claim…well, that’s another story for another insurer to tell! In the end our policyholder was very happy with the work our Claims team had put in to resolve the obstruction of rights aspect of the dispute. This meant that they were able to go ahead with the development as planned, and avoid any loss of value to the property. Negotiations on this claim proved complex as they were taking place while construction works were continuing on site. This added to the pressure on all sides to reach a mutually agreeable settlement, avoiding the worst-case scenario of having to go to court and potentially end up facing an injunction preventing the development.