In this week’s blog post I will discuss a particular case law which deals with the issue of requesting Security for Expenses under the Party Wall etc Act 1996.
What is Security for Expenses?
Security for expenses is a mechanism under Section 12 of the Act whereby the adjoining owner can request the building owner keeps an agreed sum of money on account of the building owner suddenly abandons the works or causes damage to the adjoining owner’s property in the future.
In normal circumstances, the Security Monies are held in an escrow account or the form of an insurance policy taken out by the building owner.
The exact wording of Section 12 of the Party Wall etc Act 1996 is as follows:
“An adjoining owner may serve a notice requiring the building owner before he begins any work in the exercise of his rights conferred by this Act to give security as may be agreed between the owners or in the event of dispute determined in accordance with section 10”.
How much and under what circumstances can these be requested?
In theory, there isn’t any restriction on ‘how much’ the adjoining owner can request from the building owner, it could be thousands, to tens of thousands, even to hundreds of thousands. It very much depends on the type of work taking place and the owners of the properties.
A long-held assumption was that the adjoining owner may request for security under specific circumstances whereby the works are highly complex and carry a degree of risk to their property. However, this assumption has no standing when you look into the specifics of Kaye V Lawrence 2010 which we will discuss now.
Kaye V Lawrence, What happened?
In this case, Mr Kaye was an adjoining owner and Mr Lawrence was the building owner. Mr Lawrence served Party Wall Notices upon Mr Kaye under Section 6 of the Act which deals with excavations.
One may think that why would security be required for this? In fact, the building owner’s surveyor had the same thoughts and disputed the request which was then referred to the Third Surveyor.
The Third Surveyor also felt that security in this instance would not be necessary and only become applicable if works are taking place ‘to’ or ‘on’ the adjoining owner’s land.
So did Mr Kaye accept the decision?
No, Mr Kaye appealed the decision and the matter was then referred to court.
The court overturned the decision of the Third Surveyor and the most important point taken on this ruling was that Security for Expenses can be requested for any works which affect the adjoining owner. This is regardless of whether the works are taking place to or on the adjoining owner’s land.
There are a few key points to bear in mind that surround this case:
The Soil Type
The properties were based in Sandbanks, Poole, Dorset which is effectively a beach. This means that the soil is particularly granular, so the risk of movement to properties built upon that is a great deal higher.
In this case, the proposed excavations and foundations were piled type. This means the depths at which they were being dug was a great deal deeper than normal and certainly a great deal deeper than most conventional types of residential construction work.
It goes without saying that if you can afford to live in an area such as Sandbanks where the property prices are north of 7 million pounds, you are going to be in the position to appeal a Party Wall Award and cover the surrounding costs associated with that. That was indeed the case on this matter.
The Security Quantum
The adjoining owner, Mr Kaye didn’t ask for a sum of money to be held on account. Instead, he requested that the building owner, Mr Lawrence provide an insurance policy protecting his property against damage and for the sum of 2 million pounds during the work and for two years post-completion.
Despite this case, the clear outcome, the many guides and multiple opinions on the matter, Security for Expenses is still often a hot topic of dispute amongst owners and Surveyors.
If you need to get in touch with specific advice on this aspect of the Party Wall etc Act 1996, one of our experienced Party Wall Surveyors will be happy to help and advise. You can reach us through our website or simply give us a quick call!