When carrying out construction work near shared boundaries, a common concern is the possibility of damage to an adjoining property. The Party Wall etc. Act 1996 provides a mechanism to protect neighbouring property owners by allowing them to request security for expenses before any work begins. This is designed to ensure that if damage does occur, the responsible party can cover the cost of repairs. Here’s a breakdown of how this process works.
What is Security for Expenses?
Under Section 12 of the Party Wall etc. Act 1996, adjoining owners (the neighbours) can request that the building owner (the person carrying out the construction) provides a form of security before starting any work. This security helps ensure that the adjoining owner will be compensated for any damage caused by the building owner’s works.
Security for expenses essentially acts as a safeguard to cover potential costs such as:
- Repairing damage to the adjoining owner’s property
- Securing the property if the building owner abandons the work
- Professional fees or temporary accommodation if needed
In cases where a building owner is at risk of not completing their works (for example, if they face financial difficulties), security for expenses helps prevent a situation where the adjoining owner is left vulnerable without compensation.
How Does Security for Expenses Work?
- Requesting Security: If an adjoining owner feels that they are at risk of damage due to the proposed works, they may request security for expenses. This request must be made in writing, typically through a formal notice.
- Agreement on Security: The adjoining owner and the building owner may agree on the amount and form of security (such as a deposit or insurance). If they cannot agree, the matter is referred to the appointed party wall surveyors, who will make the final decision.
- Forms of Security: Traditionally, security could be held in a solicitor’s account, but due to regulatory changes, it’s now more common to use escrow accounts or client accounts managed by RICS-regulated firms. Other options include bonds or insurance, though insurance can sometimes be contentious, as it might interfere with the surveyors’ ability to make decisions on damage claims.
- Scope of Security: The security for expenses is meant to cover potential damages resulting from the notifiable works. This includes:
- Repair costs for any damage caused
- Costs of securing the property if the building owner abandons the work
- Temporary accommodation if necessary
- Professional fees for resolving disputes
What Happens If My Request for Security is Refused?
If a building owner refuses to provide security for expenses, a dispute arises. This is where the appointed party wall surveyors step in.
The surveyors will assess whether the request for security is reasonable and determine the appropriate amount and form of security. They will consider potential damage and consult with contractors or professionals to estimate costs. This information will be incorporated into the Party Wall Award, a formal document that governs the works and responsibilities of both parties.
When Will the Security for Expenses Be Deposited?
The security must be deposited before any work commences. The building owner is responsible for ensuring that the security is deposited into the agreed account. This deposit protects the adjoining owner in case of damage.
When Will the Building Owner Get Their Money Back?
Typically, security for expenses is not immediately refunded. The release of funds happens in stages based on the progress and completion of the notifiable works. The two surveyors will assess the work as it progresses and determine when it is safe to release portions of the deposit.
The security will only be fully returned once both surveyors are satisfied that the works have been completed to an acceptable standard, and no further damage to the adjoining owner’s property is expected.
Conclusion
Security for expenses serves as a form of financial protection for adjoining property owners during construction works. By having a system in place where funds are set aside before work begins, the Party Wall Act ensures that damage claims are more likely to be handled fairly and efficiently.
If you’re a building owner or adjoining owner dealing with a party wall issue, it’s advisable to consult with a party wall surveyor to ensure that your rights and responsibilities are properly managed and that security for expenses is handled appropriately.