In this blog, Icon Surveyors will consider when it is appropriate under section 7 of the Party Wall Act 1996 for a surveyor to award compensation to a property owner, and also the application of compensation under section 11 of the Act.
When can a surveyor award compensation to a property owner under section 7 of the Party Wall Act?
The Act was put in place to ensure that an owner of the property who wishes to exercise their rights to carry out works to their property could do so on the condition that such works did not cause any unnecessary inconvenience, damage or injury to any adjoining owner or occupier and/or their property.
In the event of any of the above-stated incidents occurring, the Act provides that such person shall be compensated.
Under section 7(1), the Act prohibits a building owner from exercising any rights in a manner or at a time that would cause an adjoining owner or occupier any unnecessary inconvenience.
In order to receive any compensation under this caveat, the adjoining owner would have to have suffered a serious inconvenience. Inconvenience and building works go hand in hand and there will always be noise and muck to contend with!
There are, however, circumstances in which an adjoining neighbour might suffer an unnecessary inconvenience as a result of the works being carried out.
Take, for example, a building owner who proposes to carry out works that would cause excessive dust to settle on an adjoining owner's land and, the adjoining owner is a childminder that provides the users with the garden as an outdoor space for the children to play in.
As a direct result of the proposed works, the adjoining neighbour would be in violation of health and safety regulations if the children were to continue to use the garden. As such, the adjoining neighbour has been prohibited from providing all of the amenities and services that are usually available to her clients. In this situation, any compensation under the unnecessary inconvenience caveat would be warranted.
Another example might be an adjoining owner having to move out of their property to alternative accommodation whilst the works are being carried out. The quantum of such compensation would depend on the circumstances of each individual case.
Save to say, compensation under this heading is usually quite modest.
The compensation provision can be found under section 7(2) of the Act which provides:
“The building owner shall compensate any adjoining owner and any adjoining occupier for any loss or damage which may result to any of them by reason of any work executed in pursuance of this Act.”
It should be noted that any compensation awarded by a surveyor under the Act, can only be awarded respect to damage and losses that result from works that are carried out in the exercise of the authority conferred by the Act.
Strictly speaking, it would appear that the entitlement of compensation can only arise from works that have been authorised to be carried out under the Act, that is, they have been lawfully carried out under a Party Wall Notice or Award.
Breach of award
Any breach of an Award would constitute works that fall outside of the Act. Thus, an appointed surveyor would lack jurisdiction to make a compensatory award under the Act. The remedy in this situation is a common-law action for damages in the County Court. Though the damages sought from a County Court must not exceed £350,000. An action that exceeds this amount must be filed in the High Court.
The compensation is intended to remedy the suffering caused by actual damage or inconvenience incurred by the affected party and as such a surveyor will be seeking to restore the party into the position they would have been in prior to the works commencing. Such an award can include compensation for financial losses an adjoining owner or occupier is likely to continue to suffer after the completion of the works.
For example, a building owner carries out works that substantially reduce an adjoining owner’s footpath causing the adjoining owner to suffer from a future loss as a result of a diminution in value, or, using the example of the childminder, loss of trade.
The application of compensation under section 11 of the Party Wall Act
It should be noted that ‘compensation’ under section 7 of the Act is different from that of an award of ‘expenses’ pertaining to a disturbance or inconvenience, or, damage and losses under section 11 of the Act.
Under section 11(8) of the Act, an adjoining owner or occupier is entitled to receive money in lieu of a building owner’s obligation to make good and/or repair any damage that has been caused by the works of a building owner exercising their rights under section 2(2)(a), (e), (f) (g), (h) and (j).
Under the Act this is considered to be an award of expenses. A surveyor would therefore be seeking to award an adjoining neighbour or occupier with monies that equated to the actual costs of making good any damage or perhaps the loss of use, disturbance and/or inconvenience.
Under this section, a surveyor might award an adjoining neighbour for damage caused to driveways, underground services such as drains and pipes or the landscaping. If damage is caused as a result of the construction of new footings on an adjoining owners land, or, the building of a new wall on or next to a boundary line, the building owner who carried out the work is legally obliged to make good any damage that may have been caused to any adjoining owner’s property.
Rather than a building owner calling back contractors to repair the damage caused, it is usual practice for the surveyor to include a clause in the Party Wall Award that the adjoining owner will receive money in lieu of the building owner repairing the damage.
Section 11(11) - provision for compensation
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. This kind of compensatory award is commonly referred to as ‘Enclosure Costs’.
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.
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 title would be entitled to ‘Enclosure Costs’.
Icon Surveyors are happy to provide a free Party Wall Consultation to any building or adjoining owners who may be affected by the subject matter raised in this blog.
Notice: This blog is not an authoritative interpretation of the law; it is intended as a general guide.