Aon's monthly real estate newsletter - Includes some content on new insurance act, right to light and interview with Tim Roberts (British Land)

1. Aon Risk Solutions
Real Estate
Risk. Reinsurance. Human Resources.
Introduction
Welcome back to Property Eye, the Aon Real Estate newsletter. We’ve been on a diet and now
come as a svelte bulletin. In this edition we look at the funding agreement, give an
introduction to the Insurance Act and have a Q&A with Tim Roberts of British Land.
In this Issue
1 Introduction
1 The Insurance Act
1 UK Terrorism Changes
2 Funding Agreements
– Top Tips
3 Rights to Light – Has the
Law Changed?
5 60 Seconds with Tim Roberts,
Head of Offices & Residential,
British Land
Property Eye
October 2015
The Insurance Act
The Insurance Act received royal assent on 12 February and
will come into force in August 2016. Some have described
this as the most significant change to English insurance
contract law in over 100 years.
The Act will certainly leave policyholders in a
far better position than under the current law.
The key changes affect the duty of disclosure when
arranging a policy and the rules surrounding which policy
terms can be relied upon by insurers to void a policy. The Act is hugely significant as it changes
the legal framework for insurers, policyholders and brokers. If you would like further
information please contact your account team or email realestate@aon.co.uk.
UK Terrorism Changes
Pool Re have announced changes to the Terrorism rates affecting UK renewals from October
2015. These include;
• Pricing: There will be ‘minor changes’ to rates to make sure that the amount of money that
Pool Re generates is fair and transparent and is as risk-reflective as it can be. There will be
discounted rates for SME’s, but changes to the way in which certain clauses are costed
(particularly affecting the business interruption or loss of rent exposure).
• Deductibles: Pool Re will offer a premium discount for deductibles once the deductible gets
to a point ‘where it has an effect on terrorism loss’.
• Risk management: To reward measures such as the government’s ‘crowded places’
initiative with up to 2.5% rate reduction at property level.

2. Property Eye | Aon Risk Solutions | October 2015 2
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The security components a lender is looking to obtain include a charge over the property itself
and also a charge over the insurances that protect that property. The insurance section of the
funding agreement has the following main elements:
• Description of the insurances that should be in place
• Payment of insurance proceeds
• Provision for the lender’s interest to be noted on the policies
• Borrower’s obligations in respect of those insurances
The market tends to use the LMA (‘Loan Market Association’) form for these types of
agreement and whilst this has recently gone through some updates, in our experience there
remain some pitfalls for you to look out for.
Pitfall Suggestions
Requisite Rating Definition • Allow for the fact that not all insurers will be rated by all listed agencies. Use ‘or’ instead of ‘and’
• Recognise the level of insurer ratings (S&P A- or equivalent is good insurance security)
• Avoid asking for multiple ratings
Requests for First Loss Payee Status:
• Under the public liability (PL) insurance policy
• With no minimum payment limit
• Avoid including any PL requirement – beneficiaries of PL insurance are third parties
• Do not override existing contractual obligations to lessees
• Agree an acceptable level to deal with low value claims, experience indicates £50,000-100,000
is not unreasonable
• Defining all of the above as, ‘excluded insurance proceeds’, will save hours of drafting discussions
Not giving enough time:
• For insurers to agree to the allocation of rights
under policies
• For insurer’s and broker’s legal teams to have enough
time to approve wordings
• Get brokers involved as early as possible (speaking to the lawyers if necessary) and provide a full
copy of the first draft faculty agreement
• Ensure the investment teams are speaking to the insurance teams – brokers have a duty to keep all
information confidential
Lender’s requests for full value cover for all perils are
not always achievable, economic or appropriate for
every market. In particular for natural disasters in areas
where these are common
• For natural catastrophes carve out the full value requirement for exposed territories
• Understand what limits are available at reasonable terms and more importantly, understand what
the true impact of a loss would be
• Ensure the agreement includes the words ‘where available at reasonable economic terms’
The insurance market can change. Cover that
your lending agreement requires today may not be
available tomorrow
Ensure the agreement provides some flexibility
Action resulting from insurers downgrading
e.g. sovereign downgrade
Allow flexibility to maintain an existing insurer
An agreement may contain requirements for future
insurance (e.g. a guarantee that cover will be renewed
on the same terms)
Remove any crystal ball gazing, but ensure that the borrower has an obligation to notify the insurer of
any material changes
Non-disclosure by lenders – if the lender wants to
be an insured party then they have a general duty to
disclose
material facts
There is no market agreement as yet. Insurers take different stances over modifying the principle of
non-disclosure for lenders. The Insurance Act should bring greater clarity
Broker letters of undertaking Are they worth it? Get first party rights on the insurance cover and evidence of the same
Payment of premiums before cover incepts Include provision for payment within agreed credit terms
Insurer notices of assignment – assignment being
presented as a fait accompli
Insurers will always have to get their own legal team to agree or will negotiate amendments to terms.
The solution is to pre-agree the assigment wording with your insurer
Funding Agreements – Top Tips
The insurance section of a funding agreement may be tiny, but it
can delay the entire deal. It is worth spending some time at the
outset to get it right and avoid frustrating negotiation further
down the line.

3. Property Eye | Aon Risk Solutions | October 2015 3
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Rights to Light – Has the Law Changed?
With much of the recent commentary on the case of Coventry v Lawrence and the Law
Commission recommendations, you may be forgiven for thinking it has. However, whilst
Coventry – Lawrence did mark a slight shift in emphasis in how the courts will interpret
the existing caselaw, the Law Commission recommendations are currently only that;
recommendations. If they are eventually implemented, they will certainly alter the way Rights
to Light situations are handled. Alison Murrin, Senior Professional Development Lawyer at
Ashurst LLP explains how.
The Law Commission Recommendations
Introduction
The Law Commission issued its consultation for the reform of rights to light in Spring 2013 and
on December 4 2014 it published its report and draft bill. The Commission is seeking to put the
Supreme Court decision in Coventry v Lawrence on a statutory footing. If the legislature has the
time, rights to light will never be the same again.
Coventry v Lawrence did nothing to change the fact that an injunction is the primary remedy for
an interference with a right to light and the courts will always have a wide discretion when
deciding whether to award an injunction. However the case did change the way the courts
decide the question of whether to award damages in lieu of an injunction. The Supreme Court
rejected the rigid application of the ‘working rule’ set out in Shelfer v City of London Electric Light
Company [1895] 1 Ch 287 in favour of a more flexible and balanced approach.
Injunction v damages
The Law Commission has endorsed this by recommending a statutory test which has, at its
heart, the concept of proportionality. By applying this new test the courts would not be
permitted to grant an injunction where this would be disproportionate, taking into account
such issues as the conduct of the parties, the public benefit of the development, the delay of
the claimant in enforcing its rights, the loss of amenity (taking into account the extent to which
artificial light is relied on) and the impact of an injunction on the developer. This concept of
proportionality will involve the court in carrying out a balancing exercise, weighing up a
number of factors. This will not necessarily be easy, but at least it does allow the Court to be
more flexible and take into account the public benefit aspect of the grant of planning
permission for the development. However, If the judgement in Coventry v Lawrence is anything
to go by it is likely that it will be very difficult to persuade the courts that anything other than
an injunction is appropriate where the actionable infringement of a right to light relates to a
residential property and the claimant wishes to preserve their light.
Interestingly the Law Commission has decided not to replicate that element of the Shelfer test
which requires the court to consider whether or not it would be ‘oppressive’ in all the
circumstances to award an injunction. Instead the statutory test considers the ‘impact’ of an
injunction on the developer. Of course, it will be down to the courts to rule on the
interpretation of these words.
Article by:
Alison Murrin
Senior Professional Development Lawyer,
Ashurst LLP
+44 (0)20 7859 3123
alison.murrin@ashurst.com
Insurance Commentary by:
Mark Swallow
Technical Director, Legal Indemnities,
Aon
+44 (0)202 7086 3168
mark.swallow@aon.co.uk

4. Property Eye | Aon Risk Solutions | October 2015 4
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Measure of damages
The Law Commission makes no recommendation for a change in the
measure of damages awarded in lieu of an injunction. This is an
extremely complex area of the law and may be a missed opportunity
to change the basis on which damages are calculated and move
away from profit related damages which developers argue are not a
fair assessment of the sum to be paid for the release of the right to
light. However, as the Law Commission points out, a reduction in
the level of damages may actually have the unexpected knock-on
effect of increasing the number of injunctions awarded.
This has not been completely kicked into touch, the Law Commission
suggests that the Government keeps a watching brief on this
particular aspect and reform may follow at a later date.
Prescription
The Law Commission has also made a U-turn and is no longer
recommending the abolition of prescriptive rights. This was a
step too far for many respondents to the consultation and would
have put rights to light on a different footing to other easements.
Instead the Law Commission have suggested a simplification of the
scheme which enables the acquisition of a prescriptive right to light
to be interrupted, and brought to an end, without physically
obstructing the light.
Other recommendations
Other key recommendations include:
• A statutory notice procedure which would enable a landowner to
require their neighbours to tell them within a specified time if they
intend to seek an injunction to protect their right to light, or to
lose that remedy
• Amendment of the law governing where an unused right to light
is treated as abandoned
• A power for the Lands Chamber of the Upper Tribunal to
discharge or modify obsolete or unused rights to light
Conclusion
The Law Commission describe their recommendations for the reform
of the law of rights to light as an undramatic but significant change
in the law designed to update it and to maintain an appropriate
balance between development in the public interest and the
protection of the amenity of our homes and workplaces. However if
these recommendations become law we will surely see a real shift in
how rights to light disputes are handled and resolved.
However, these recommendations will not take effect in full unless
and until the Government responds to, and gives effect to, the
recommendations in the 2011 Report, Making Land Work which
deals with the general reform of the law relating to easements
and covenants.
The recent County Court decision of Scott v Aimiuwu (unreported) indicates that the
Courts will apply the Supreme Court’s reasoning in Coventry v Lawrence in rights to
light cases. In the Scott case damages were awarded in lieu of an injunction and the
damages were calculated on a compensatory basis rather than by reference to a share
of developer’s profit. However each case will turn on its own facts and here the injury
affected secondary rather than primary accommodation. It is a useful decision for
developers in relation to the assessment of damages point, but the Courts may still be
persuaded to award profit related damages in other circumstances.
Insurance Commentary
It could be argued that Coventry v Lawrence and the Law Commission
Report have both served to remind all parties facing rights to light
situations that when you injure a third party’s rights, the remedy is
an injunction and only if compensation can be justified would an
injunction be avoided. It is easy to forget when looking at a rights of
light report, that when a material injury is listed as ‘non-injunctible’
that is the surveyor’s opinion rather than fact and the legal starting
point is the precise opposite.
Insurers are grateful that the courts have moved towards a more
flexible interpretation of the Shelfer requirements for compensation
to replace injunction. However, there has not yet been any knock-on
effect on the availability of cover nor on premiums. Coventry v
Lawrence was not a rights of light case and some commentators have
said that for significant injuries to residential properties, the case
may actually make an injunction more likely. The Law Commission
Report, as Alison points out, is still some way off being law.
The Scott case, whilst perhaps indicating a trend within the judicial
system, cannot yet be relied upon when underwriting and so
insurers continue to adopt a cautious approach.
The risk from rights of light injuries remains very real and insurance
will continue to be a valuable tool for developers and funders when
faced with such issues.

5. About Aon
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Risk. Reinsurance. Human Resources.
60 Seconds with Tim Roberts,
Head of Offices & Residential, British Land
1. How would you describe yourself in
three words?
a) Determined
b) Open
c) Down to earth
2. What is your most amusing or embarrassing
moment in property?
Being stuck on a roof on a building in
Theobalds Road, when the fire door shut in
the early 90’s when mobile phones didn’t
work properly and having to shout down to
people on the pavement below!
3. British Land are very committed to occupier
satisfaction surveys. Is there a key learning
that you are willing to share?
Simply that there is not a good business in
the world that doesn’t put its customer
needs first.
4. What is your passion outside work?
Apart from my family it is, in order, skiing,
golf and tennis.
5. Is the buoyant demand for Central London
and prime regional assets creating a
vacuum, where property will take longer to
recover elsewhere?
There is clearly a lot of demand for London
and prime regional assets, and this has
pushed up prices. I don’t see the lack of
demand for other regional assets as a
vacuum. As market prices adjust, and
adequately reflect the outlook for
performance, then investor demand for
non-prime regional assets will return.
With the hope of sustained economic growth
we could be on the verge of this already.
6. Have you a favourite gadget you now can’t
live without?
iPad Mini as using the Ubersense app I can
record and analyse my golf and tennis swings.