In this week’s blog post, I am going to be looking at security for expenses, and in particular what it covers.
Security for expenses is dealt with under Section 12 of the Act, and is the mechanism whereby the adjoining owner can request from the building owner a sum of money to be held on account in the event of any issue such as the works being incomplete, or there being some form of damage to their property.
Historically, the view had always been that security for expenses can only deal with the cost of safeguarding the adjoining owner’s property in the event that the building owner’s works were unfinished.
In practice, this would mean that the building owner, for whatever reason didn’t complete the works, thereby leaving the adjoining owner’s property in a position where it could be at structural risk from the incomplete works.
However, views of what security for expenses can cover have changed and adapted over time. These days security for expenses can not only deal with the cost of the unfinished works, but can also deal with any other costs that may relate to the adjoining owner having to call upon the security to safeguard their property.
These costs aren’t defined in the Act, and can therefore be widely interpreted to include professional fees, court costs, temporary accommodation costs, making good of damage costs, along with any other costs that could be reasonably incurred as a result of the building owner undertaking their party wall works.
This poses a slight risk to building owners undertaking their works, as it could see them have to place a significant sum of money on account before they start the works.
With such a large sum of money, usually in the region of £10,000 to £100,000 as an average being on account, the building owner could find themselves in a position where they simply don’t have the cash flow to place the funds on account and undertake the construction works.
It is therefore for the party wall surveyors to carefully look at the security sum that is being requested and be sparing with any figure that is agreed within the Award.
As with any legal matter, case law is always called upon when there is dispute or disagreement between professional practitioners.
Security for expenses was most notably dealt with in the case of Kaye Vs Lawrence. This case saw an adjoining owner request a sum of money to be held on account, the building owner disputed the sum of money, the dispute then falling into the hands of the party wall surveyors to determine as part of their statutory duties.
What is slightly interesting about this case is that at the time both the building owners’ surveyor, the adjoining owners’ surveyor, and the third surveyor all determined that security wasn’t applicable to Section 6 and therefore did not award any security within the Party Wall Award.
The adjoining owner appealed the Party Wall Award, and it was then upheld that security for expenses is applicable to all of the works that fall within the remit of the Party Wall Act. The case also confirmed that security for expenses doesn’t need to be limited to expenses of safeguarding the works.
This means that the sum of money doesn’t just need to be limited to the actual cost of safeguarding the property and therefore comes the view that expenses outside of that also apply.
Security for expenses is a tricky matter, and will commonly only come into play on works of increased structural risk, for example, basement excavations, underpinning, or extensive structural works throughout the property.
If you are planning on undertaking works to your property and believe that security for expenses may be applicable, or your neighbour is undertaking works to their property and you would like to request security for expenses, I would suggest getting in touch with an experienced party wall surveyor at the first instance to discuss the site specific facts to ensure that the acts for protections are taken into account.