In this article, we will be looking into the Party Wall etc. Act 1996 and more specifically, Section 12 of the Act.
SECTION 12 OF THE ACT CONFIRMS:
An adjoining owner may serve a notice requiring the building owner before he begins any work in the exercise of the rights conferred by this Act to give such security as may be agreed between the owners or in the event of dispute determined in accordance with section 10.
Where (a) in the exercise of the rights conferred by this Act an adjoining owner requires the building owner to carry out any work the expenses of which are to be defrayed in whole or in part by the adjoining owner;
or (b) an adjoining owner serves a notice on the building owner under subsection (1), the building owner may before beginning the work to which the requirement or notice relates serve a notice on the adjoining owner requiring him to give such security as may be agreed between the owners or in the event of dispute determined in accordance with section 10.
WHAT IS SECURITY FOR EXPENSES:
Security of Expenses is a sum of money which is placed by the building owner into a secure account.
The sum of money is then on account to cover two distinct scenarios:
DAMAGE:
The security will deal with damage to the adjoining owner’s property that may arise as a result of the proposed works to be carried out by the building owner.
By having the funds on account, the adjoining owner will have a faster and easier route to accessing the security funds thereby enabling them to remedy any damage associated with the works.
PROTECTION AND SUPPORT:
The security will deal with the necessary protection and support required to an adjoining owner’s property in the event the building owner leaves their property in a state where there is risk of movement.
By having the funds on account, the adjoining owner will be able to mobilise their own contractors to install either temporary or permanent support to the property.
HOW DOES IT COME INTO PLAY:
When an adjoining owner is with served a Party Wall Notice, post response, they can return to the building owner with a Notice under Section 12 of the Act relating to Security for Expenses.
Upon receipt of the adjoining owner’s Section 12 Notice, both the quantum of the security and the manner in which it is held, can be agreed between the owners.
However, if this cannot be agreed between the owners, under Section 10 of the Act the sum can be determined by the Party Wall Surveyor(s). Section 10 of the Act is the protocol for dealing with disputes .
The Party Wall Surveyor(s) role will be to assess the overall risk of the works on the adjoining property and agree a reasonable security for expenses sum. Furthermore, the manner in which the security is to be held.
In practice, the sum for Security of Expenses is usually substantial and ranges anywhere from £1,000 to £100,000 plus*.
*This would be a usual market sum for high risk works such as substantial basements or structurally complex works.
We would always advise that building owners who are proposing structurally complex works should take Security for Expenses into consideration when budgeting for the planned works.
To overlook this, could present them in a scenario where the cash flow of the build is prohibited by virtue of having those funds held within the security account.
If this scenario does arise, the Party Wall Surveyor(s) could look at cash flow easing solutions such as phased security release.
Section 12 of the Party Wall Act is complex matter and can often be a tipping point for dispute between owners and surveyors alike. Be sure to open discussions early with your Party Wall Surveyor to ensure you’ve got sound and well placed advice.