Under Section 12 of the Party Wall etc. Act 1996, the adjoining owner can request that security be provided before any notifiable works commence. This security is intended to protect the adjoining owner against risks arising from the works.
How Is Security Requested?
- The request must be made in writing by serving a formal notice.
- Security is most commonly requested by the adjoining owner to the building owner.
- Security is usually requested as a sum of money but can also take other forms such as an insurance policy.
Holding the Security
- Traditionally, the money has been held in a solicitor’s client account, with a formal undertaking that funds can only be released with the agreement of the appointed surveyors or the third surveyor.
- However, since 2014, the Solicitors Regulation Authority has advised that solicitors should only hold funds when properly connected to the legal services being provided.
- As a result, there are now specialist escrow account providers who hold security funds independently.
Why Is Security Requested?
- Historically, security was intended to cover the risk that the building owner might stop work part way through, leaving the adjoining owner’s property vulnerable and requiring urgent safeguarding.
- Today, security is also used to cover the risk of damage caused by the works and to cover certain related expenses.
- Requests for security have become increasingly common, especially for major projects like basement excavations, where the risk of damage to neighbouring property is significant.
Agreeing the Security
- The type and amount of security should be agreed between the building owner and the adjoining owner.
- If there is a dispute, the appointed surveyors can resolve it under Section 10 of the Act by making a Party Wall Award.
Practical Considerations
- For significant works, such as basements, it is reasonable that the adjoining owner should be protected against the risk of the building owner’s inability to meet potential liabilities—particularly where the building owner is a limited company with limited assets or an offshore entity.
- Surveyors usually do not spend time recovering costs related to security unless the amount or type of security is disputed.
- However, a surveyor appointed by the adjoining owner should always advise their client of their rights under Section 12 when relevant.
- Building owners should be aware that providing security may affect their cash flow or financing arrangements, as funds might be held until the risks have passed.
Summary
If you are a building owner planning substantial works that may impact your neighbour’s property, expect that you may be required to provide security prior to starting work. It is important to seek advice from a party wall surveyor early to understand your obligations and plan your project accordingly.