With building work ramping up across the public sector, the risk of a legal challenge is increasing too. Aon’s Matthew McKinley, public sector development manager, and Vicky Sweeney, head of rights of light insurance, outline the types of challenge public sector organisations might face and how to avoid the associated hassle and expense.
Whether it’s town-centre regeneration, new hospital or university facilities, or an affordable housing project, property development is part of many public sector organisations’ remits. But, with legal challenges a possibility, building in a legal indemnity policy can ensure a project runs more smoothly.
There’s plenty of building work underway across the public sector. As well as the New Hospital Programme, which aims to deliver 40 new hospitals by the mid-2040s, universities are busy building more accommodation and facilities to attract students. The government also plans to deliver approximately 280,000 new homes in England by 2030 and unlock land for a further 400,000.
Property legal risks
But, while these plans are ambitious, it’s important not to overlook the legal risks associated with property development. There are more than 40 different legal and planning risks to consider when developing land or property and while some are less common than others, they all come with a huge amount of hassle and expense.
Legal challenges can arise due to issues relating to title guarantees, restrictive covenants or missing deeds and documents. There could also be disputes regarding planning permission, especially where something has been overlooked, and over rights of way to facilitate access.
Rights of light
Some legal challenges can be particularly problematic. A right to light is an easement that gives a property owner the right to receive natural light through defined apertures, such as windows.
Where a property owner believes this right is – or could be – infringed by a new development, they can take legal action against the developers. While people usually settle for compensation, they could potentially prevent the building work or, if it’s been completed, even insist it’s demolished.
Bankside Yards case
A recent case, Cooper & Powell v Ludgate House Ltd (2025), illustrates just how expensive these claims can be. In the case, which is commonly known as ‘Bankside Yards’, two property owners claimed the 19-storey Arbour Tower would block their light. As well as asking for at least £3m each in damages, they filed an injunction to pause and modify construction, including demolishing parts of the tower. Although the judge agreed that their right to light had been infringed, they were awarded £500,000 and £350,000 in damages and the development was allowed to remain. While these are much smaller settlements than outlined in the original claim, it’s still a significant amount of money and hassle to add to a building project, and much more than initial analysis suggested.
Renewables and mineral rights
As public sector organisations develop more solar farms and battery storage to produce cheaper electricity and meet net-zero targets, they could find themselves facing mines and minerals claims. While they may own the land, they may find that ownership of any ‘mines and minerals’ below it is registered to another party, giving them access and extraction rights.
Clearly, discovering this after a large solar farm has been constructed can be hugely inconvenient and potentially very costly. Undertaking thorough due diligence to identify any mineral rights issues before work commences is essential, but it can still cause significant problems.
Legal indemnity insurance
With more property development underway across the public sector, the risk of a project stalling or budgets multiplying due to a legal challenge increases. Taking out legal indemnity insurance can significantly reduce this risk.
Policies cover potential financial loss or liability if a legal challenge arises, saving time and giving greater certainty that a development or transaction can go ahead. It can also help with financing: lenders are often reluctant to back projects where there’s a risk of dispute.
Legal indemnity insurance policies are written in perpetuity, giving long-term cover in exchange for a single premium. Additionally, the market is becoming more innovative and can write sophisticated bespoke policies tailored to each project where required.
Protecting your organisation
Whether your organisation routinely arranges this cover, or it’s a new area, we recommend working with your legal team and specialist insurance broker to identify risk on any property developments or transactions. They will be able to highlight any exposures and recommend the most appropriate type of cover.
It’s also prudent to consider cover as early as possible in the building project as this ensures protection is in place from outset. Policies can even be set up on a pre-planning basis.
Market conditions are positive for organisations taking out cover. The legal indemnity insurance market is competitive, with several new entrants in the last few years. Pricing depends on the nature of the risk, but a more straightforward title risk can be covered at lower cost. Even more complex risks can be protected at a fraction of the cost of a legal case or the demolition of a development.
As building work continues across the public sector, a legal indemnity insurance policy could deliver greater certainty and save your organisation time and money if it does face a challenge.
More information
For more information about how legal indemnity insurance could benefit your organisation, speak to your Aon account manager or contact Matthew McKinley or Vicky Sweeney
About Aon
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This article has been compiled using information available to us up to 12/02/2026.
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