In this blog, Icon Surveyors will consider what Party Wall Enclosure Costs are; when they are applicable and how they are worked out...
What are Party Wall Enclosure Costs?
In the simplest of terms, ‘Enclosure Costs’ are monies that can be claimed back from costs solely borne by a building owner who carried out works on a property or land that an adjoining owner will later use for their own benefit.
An example of what would trigger an enclosure cost would be when a building owner builds an extension with a party wall separating both of the owner’s properties and at a later date, the adjoining owner uses the newly built party wall to build their own extension.
There are further situations in which a preceding building owner may be entitled to be compensated towards the costs they initially laid out whilst carrying works that created a new party wall and/or rebuilt or repaired an existing party wall.
An example might be a preceding building owner's building of a loft extension with a dormer window the raised wall of which provides a new party wall that the preceding adjoining owner now wants to use to carry out his own works. As can be seen in the facts of the case of Stone v Hastie (1903)2 KB 463.
When are Enclosure Costs Applicable?
Under section 11(11) of the Act, there is a provision for compensation to a building owner for the subsequent use of any works carried out by an adjoining neighbour. However, for a building owner to take advantage of this provision, the expense of initial works must have been met solely by the building owner.
It would appear from RICs website that the Court of Appeal decision in the case of Stone v Hastie (1903)2KB 463, applies to section 11(11) The Party Wall etc. Act 1996.
However, in that case, the Court was considering section 95(2) of the London Building Act 1894. In their decision, they concluded that neither, the Court, nor, the Party Wall surveyors, had jurisdiction to deal with the matter being raised by Mr Stone.
Mr Hastie was a ‘tenant’ who had been granted a 21-year lease by the ‘freehold owners’ who had carried out works some years prior to granting Mr Hastie’s lease. The works involved raising a Party Wall. Mr Stone the adjoining owner wished to carry out similar works to his adjoining property with the benefit of using the raised party wall, however, Mr Hastie refused to consent to the works being done and insisted that he be compensated as the new leasehold owner for the party wall works that had been carried out and paid for by his landlords, the freehold owners. In accordance with the Court's interpretation of the Act, As per Collins MR, “The provisions of the Act appear to me to contemplate that the recoupment shall be to the owner who raised the wall”
For that very reason, neither the Court nor, the Party Wall Surveyors’ had the jurisdiction to determine Mr Stones’ case, as Mr Hastie was not entitled under the Act to compensation, the court could not legally determine a case against him.
It should be noted that a preceding building owner has the legal right to waive their entitlement to any future compensation from an adjoining owner. This can be done at any time, that is to say when the initial works were being carried out by the preceding building owner and/or at the time the preceding adjoining owner wishes to carry out subsequent works using the party wall. Icon surveyors would always recommend that such waivers are recorded in writing.
How are Enclosure Costs Calculated?
The Act further provides how such compensation should be calculated by assessing what the wall would cost to build at the time of the newly proposed extension and dividing the figure in half. This is designed to cover any inflation in cost that may have occurred between the time of the initial build and the subsequent build. Generally speaking, enclosure costs are usually included in a Party Wall Award and are due to be paid by the initial adjoining owner at the commencement of the subsequent works. It should be noted that the initial building owner who is entitled to be compensated need not be the same person that carried out the initial works. Any successor in the title would be entitled to ‘Enclosure Costs’.
Icon Surveyors are happy to provide free consultation on Party Wall Matters to any building or adjoining owners who may be affected by the subject matter raised in this blog.