There is a basic principle in law that the owner of a property will also own the airspace above that property, to such a height as is necessary for the ordinary use and enjoyment of it. This was established in the aptly named legal case Bernstein of Leigh (Baron) v Skyviews & General Ltd. Naturally, commercial landowners strive to extract the maximum possible return from their investments. One way that can be achieved is by utilising the principle above and looking upwards, either by extending the property themselves through the addition of new floors and flats, or by granting a lease of the airspace above the property to a developer.
Who owns the airspace?
For property owners wishing to explore the possibility of developing upwards, the first step to take is to ascertain whether they have the necessary rights over the roof and the airspace above their property. If they own the freehold outright and the property is not subject to any leases, they are unlikely to encounter any issues in this regard. The position should also be relatively straightforward if there is a lease or leases of parts of the building. In a standard lease of part, the landlord will retain the structure, and in the absence of any express provision in the lease to the contrary, the structure would include the roof and the airspace above.
The position becomes murkier if there is a lease of the whole of the building. In such instances, who has rights over the roof and airspace? The lease will in all likelihood include the structure, which would suggest that it might be the tenant. The case of Ralph Kline Limited v Metropolitan and County Holdings Limited dealt with this very point. Essentially, it was held that the court would look at the construction of the lease as a whole to determine the position. In that particular instance, the court found that the airspace was included within the lease of the building, and therefore the landlord couldn’t grant a lease of the airspace to a developer as it had intended to do. Crucially, there had been no express provision in the lease stating that the landlord retained the airspace or that the airspace was excluded from the demise.
Therefore, if you are a landlord and there is a possibility that you might want to develop upwards at some point in the future, you will need to be very careful when granting leases to ensure that the roof and airspace are not included in the property being let.
Will developing upwards breach an existing lease?
If a landlord intends to develop upwards and there are existing leases of property in the building, they should take care to ensure that their planned development works will not breach any terms of those leases. Ideally, there should be an express reservation in each lease permitting the landlord to carry out development works in the building and there should also be express rights of access in each lease to enable the landlord to carry out the development. Landlords should also check that none of the covenants in any relevant leases contradict their retention of rights over the roof and air space. For example, a repair obligation requiring a tenant to be responsible for external roof repairs would certainly be contradictory to an argument by the landlord that it had rights to develop the roof and airspace. The lease terms will need to be consistent as any ambiguity could be used by the tenant to oppose plans by the landlord to develop upwards.
Landlords should also be aware that developing upwards might potentially breach the landlord’s covenant of quiet enjoyment, depending on whether the carrying out of the works constitutes a nuisance or not. Development works inevitably are noisy, disruptive and intrusive. The 2016 case of Timothy Taylor Ltd v Mayfair House Corporation and another illustrates this point. Here, the High Court awarded a tenant damages, deciding that the scaffolding and noise generated by development works had sufficiently impeded the tenant’s right to quiet enjoyment.
Tenant’s right of first refusal?
If a landlord wants to grant a lease or sell the roof and air space to a developer, they may need to consider whether any of the existing tenants have statutory or contractual rights of first refusal and if so, they would need to go through the relevant procedure before they could make such a disposal. For example, a disposal of air space could be a disposal under the Landlord and Tenant Act 1987, as was the case in Dartmouth Court Blackheath v Berisworth Limited where it was held that the landowner was required to offer a lease of the airspace to existing residents in the building before a prospective developer tenant. A failure by a landlord to make an offer to residential tenants who have a statutory right of first refusal can have serious consequences, including criminal liability.
Are there any restrictive covenants?
One other potential impediment to developing upwards might be the existence of restrictive covenants on the title. There may be covenants restricting the height of the building, the number of floors, the number of units, etc. That being said, the existence of such covenants may not be fatal. If the party or parties with the benefit of the covenants can be ascertained, the landlord could approach them to negotiate the removal or modification of the covenants. If that is not on option, they could apply to the Upper Tribunal (Lands Chamber) to have the covenants modified or discharged if one of the relevant grounds apply, for example if the covenants have become obsolete or if the proposed use of the property serves a public purpose. They could also consider obtaining indemnity insurance to cover against the breach of such covenants.
There may be physical obstacles to developing upwards, such as a roof terrace. There might be telecoms equipment, a satellite dish or masts which need to be relocated. Landlords will also need to consider planning permission, building regulations compliance and the possible need for a party wall agreement. The proposed development may also potentially infringe rights to light of a neighbouring property.
Professional advice should be sought as early as possible on all these issues to prevent wasted costs or unnecessary delays eating into profit margins.
Jack Lightburn – rhw solicitors llp
If you have any questions about the contents of this article, or any other commercial property queries, please contact our Commercial Property Team in Guildford. Call 01483 302000 or email firstname.lastname@example.org