The true legal position is actually fairly straightforward but widely misunderstood.
It is true that RIPA does not apply in this scenario but it is important to remember that Part II of RIPA (the bit that deals with surveillance et al) is enabling legislation i.e. it does not actually make any activity unlawful. The key point in this scenario is that the Human Rights Act 1998 (which does make certain activity unlawful) only applies to public authorities and those acting as agents of same.
Any member of the public is perfectly entitled to install either a covert or overt video camera on their own premises with a view of their neighbours premises or the public highway. This activity will not interfere with any person's rights to respect for their private and family life as the Human Rights Act 1998 does not apply to the actions of private citizens.
There are, however, one or two caveats. Where the use of the covert or overt cameras can be seen as amounting to harrassment of the filmed party (within the meaning of the Prevention from Harrassment Act 1997) then that conduct may amount to a criminal offence.
Similarly, common sense will tell you that if your camera is such that it captures imagery of, for example, naked children playing in a neighbours garden, you may find yourself in hot water.
It is also important to bear in mind that if the covert surveillance is carried out by a member of the public on behalf of a public authority, any privacy interference is likely to fall within the coverage of the Human Rights Act and some form of lawful authority will be required.
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