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Air rights unlock valuable development space. We explain what they are and their restrictions, plus share lender feedback and answer FAQs.
- Air rights explained
- How high can you go?
- Putting a price on air rights
- Right to light
- Air rights – a lender’s view
- Air rights FAQ
Air rights explained
Air rights are a thing and not just castles in the air.
If you are unsure, ask the tax man. HM Revenue & Customs capital gains tax guidance clearly defines land as:
- All the buildings located on the plot
- Any fixtures within the boundaries
- Any minerals under the surface
- Any air space above the land
An important consideration is the right of passage for aircraft flying over the land, which may restrict the air rights.
How high can you go?
Air rights extend further than you might think but not as far as the stars.
How far is not strictly defined in law although Section 76 of the Civil Aviation Act 1982 suggests somewhere between 500 and 1,000 feet.
Local planners will take a view based on the height of surrounding properties, how the development will impact the skyline and if your land is within a conservation area, for instance.
The first UK air-rights building was One Embankment Place, a block of offices built above Charing Cross Station, London, completed in 1991. Other air rights buildings include Alban Gate, London Wall, and Cannon Place, above Cannon Street Station, London.
Putting a price on air rights
Property sales in the UK do not include air rights, but that does not mean they have no value.
There’s a big difference between the price of a plot with outline planning for a two-storey house and one with three or four storeys.
If you are the landowner, you’re increasing the value of your development without increasing the cost of the land because you already own it.
Changes to permitted development rights by Housing Secretary Robert Jenrick add to that.
He’s signed off on relaxing PDR rules for homeowners, commercial landlords and developers who want to build upwards.
The idea is to allow families more space, but developers are already looking at adding extra letting rooms to shared houses in multiple occupation (HMOs) to generate more rent and to push up the value of their investment.
London Penthouse is already cashing in on air rights in the capital.
The firm says suitable sites must have a flat or unconverted pitch roof and a staircase that reaches the top floor.
The air rights market is more mature in America.
In New York, airspace in Manhattan is changing hands for £176 a square foot, while the US national average is nearer £50 a square foot.
Right to light
Air rights come hand in hand with the right to light.
Right to light allows a landowner uninterrupted light coming across neighbouring land into a window.
If a neighbour develops a plot that disrupts the path of light into your windows and no agreement is reached to resolve the dispute, the aggrieved landowner can take the matter to the courts.
Air rights – a lender’s view
Not all lenders like air rights. This might change as the government makes it easier, but as of today most prefer not to fund these schemes.
The main reason for this is the complexity around the build. Lenders that will lend on air rights schemes will insist you work with a contractor that has experience of air rights projects.
Lenders face a reputational risk if the scheme goes wrong, as it will impact the occupants below in some way, regardless of if they are residential or commercial tenants.
If you own the property below with a loan secured against it, then the air rights should be put into a separate ownership if you want to approach a different lender for the development finance. Typically, lenders see a new lease created and transferred into a different company ownership, which allows any development lender to perfect their security.
Air rights FAQ
Thinking about how air rights can add value to a building project is a new factor in an already complicated jigsaw for developers.
Because the topic is new, developers have lots of questions to ask before committing to a new opportunity.
To help with the decision, here are the answers to the most common questions about air rights.
Who decides if a building is suitable for air rights development?
This is a question for expert structural engineers. They should carry out a detailed inspection at the earliest stages of development to calculate if a building is strong enough to support the additional weight of an air rights development.
Can leaseholders build above a property rented to tenants?
Strictly speaking, the freeholder retains the right to build into the air space above the land they own. However, if the property earmarked for air rights development is tenanted, the freeholder should discuss the plans with the tenant to avoid unpleasantness and costly legal arguments.
How high can you build?
Although your air rights extend to at least 500 feet, you can’t go that high without planning permission. How high you can build depends on the size and location of your plot and the likely impact on the neighbourhood.
Do you automatically own air rights, or do you have to register for them?
Air rights come with the freehold of your land, which includes any buildings, fixtures, mineral rights and air rights, subject to certain conditions. You do not have to register or pay any fees to own them, especially if you already own the land in question.
How do I deal with the right to light?
One way is to apply the 45-degree rule, which basically says an extension should not encroach over a line drawn at 45 degrees from the centre of the nearest window in a habitable room on the ground-floor of a neighbouring property.
How much are air rights worth in the UK?
The market is largely untested and until sellers start charging a premium for air rights, the price is likely to remain up in the air, so to speak.
If you're looking for more information on air rights or development finance more generally, for yourself or your clients, please get in touch - firstname.lastname@example.org.