Security for Expenses
Posted on 25th April 2019 at 13:18
Under section 12 of the Party Wall etc. Act 1996, an owner can request that the other owner provides security prior to commencing the works. This is usually a request from the adjoining owner to the building owner, but an adjoining owner can also request security.
The request by an adjoining owner has to be made in writing, by serving a notice on the building owner. Security is more often than not a request for money but it can be in other forms, such as an insurance policy.
Security by way of money, has traditionally been held in a solicitors account with an undertaking that the money can only be released on the agreement of the appointed surveyors or third surveyor. However, the Solicitors Regulation Authority, back in 2014, issued a warning that solicitors should not provide banking facilities through a client account unless there is a proper connection between receipt of the funds and the legal services the solicitor is providing. There are now several specialist escrow account providers who will hold the money instead.
With the prevalence for basements excavations in London in particular, requests for security are now more common because of the potential for damage to adjoining property. In the past, security was thought to cover the risk of a building owner ceasing work either temporarily or permanently part way through the notifiable work, leaving the adjoining owner's building in a precarious state requiring immediate safeguarding works. It is now widely considered that security can be used to cover the risk of damage caused by the works and for other certain expenses that arise.
The type and amount of security is agreed between the owners, but in the event of a dispute, the appointed surveyors will determine the dispute under s.10 of the Act by award.
If significant works are being proposed, such as a basement construction, it seems logical that an adjoining owner should not have to take the risk that the building owner may or may not have funds to cover the adjoining owner's potential losses. This is more pertinent where the building owner is a limited company with unknown, little or no assets or an offshore company.
Unless the type or amount of security is disputed, surveyors should not expend any time that they wish to recover as reasonable costs on behalf of the adjoining owner on the matter. Having said that, most surveyors will advise their owner in some way and provide a template notice. A surveyor appointed by an adjoining owner should always advise their owner of their rights under s.12, where it is relevant to the work being proposed.
If you are a building owner proposing significant works that could be detrimental to the adjoining owner's property, you may have to provide a sum of money as security before you can commence work, which may not be released until the risk for which the security is held has passed. This may have an effect on how you can fund your development and you should bear this mind and take advice from a party wall surveyor as early as possible.
Share this post: