This blog is not an authoritative interpretation of the law; it is intended as a general guide.
In this blog Icon Surveyors will be considering what security for expenses are and how they can help resolve disputes.
What Are Security for Expenses?
Under section 12 of the Party Wall etc. Act 1996, an adjoining and/or building owner has the right to request that a building owner deposits a sum of money into an escrow account for any future loss and/or damage that may be caused to the adjoining owner as a result of the building owners works.
In section 12(1) of the Act, an adjoining and building owner may come to an agreement without the intervention of any other party. However, should a dispute arise in accordance with section 10 of the Act and a surveyor is appointed, it is the surveyor or surveyors as the case may be, that will determine whether security for expenses are necessary and the sum that is required to be deposited. If the latter and most common scenario should arise, the appointed surveyor will determine where the monies are to be deposited and held. It should be noted that any funds held for security of expenses are refundable if the foreseeable future damage and/or loss does not occur.
Section 12(2) of the Act provides that an adjoining owner has the right to request security for expenses if the adjoining owner requires the building owner to carry out works that have been paid for by the adjoining owner, or the adjoining owner serves a notice on the building owner under section 1 of the Act.
If such a notice is served by an adjoining owner the building owner is afforded the right to serve a notice on the adjoining owner requiring the same to provide security. This can be agreed between the respective owners or be determined by a surveyor in accordance with section 10 of the Act.
Section 12(3) of the Act provides that any adjoining owner who fails to comply with a building owner’s notice or surveyor’s determination under section 10 of the Act, will not be able to rely on their initial notice requiring security for expenses from a building owner as the notice shall cease to have effect. The only remedy that might then be available to the adjoining owner is to start the whole process of service of a new notice.
In answer to the question, security for expenses is a useful tool for both a building and adjoining owner. This is especially so if an adjoining owner feels that they will have to experience either a long and drawn out process to recoup monies for loss and/or damage that may result from a building owner executing their rights under the Act.
Icon Surveyors are happy to provide a free consultation to any building or adjoining owners who may be affected by the subject matter raised in this blog.