Security for Expenses

The Security for Expenses provision in the Party Wall Act provides a useful mechanism to proactively resolve potential disputes due to planned construction work.

We provide a strighforward, fully regulated service for managing security in accordance with the Party Wall etc. Act 1996. With our unrivalled experience we can hold security whether or not the matter is being dealt with by one of our team, in accordance with a Party Wall Award or under the terms of a licence.

Security for Expenses Background

The Party Wall etc. Act 1996 was introduced in the United Kingdom to provide a legal framework for resolving property disputes related to construction, allowing works to progress whilst maintaining harmonious relationships between neighbouring property owners.

The Security for Expenses provision at Section 12(1) of the Act specifically deals with establishing a level of protection for Adjoining Owners relating to foreseeable expenses that can arise due to their neighbours works under the Act.

A request for Security for Expenses typically arises in more substantial projects such as construction of a basement but there is nothing stopping an Adjoining Owner making such a request on any scheme if reasonable to do so.

Understanding Security for Expenses under the Party Wall Act

Section 12(1) of the Party Wall etc. Act 1996 reads as follows:

‘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’

But what does this mean in practice?

In essence, it means that if an Adjoining Owner serves such a notice, the party carrying out the work may be required to make a deposit to cover foreseeable expenses that may arise to the Adjoining Owner.

This is particularly pertinent in the event of insolvency of the party undertaking the works or the contractors involved with the scheme mid-way through works being undertaken. The security for expenses deposit can cover any of (but not limited to) the following:

a.) Necessary alterations or reinstatements of the works undertaken

b.) Repairs required to an Adjoining Owners property

c.) Temporary accommodations required and;

d.) Potential fees arising from such a situation.

Ensuring proper management and security of security is essential to prevent potential conflicts of interest and legal disputes.

The first step in establishing security is the service of a notice by the Adjoining Owner which establishes a clear request for security with a view to reaching an agreement with the Building Owner.

Security for Expenses – What happens if a request for security is refused?

If the Building Owner does not agree to the request for security, a dispute arises under the Act and the appointed party wall surveyors step in to make a determination.

In doing so the surveyors must consider:

i.) If security is required for the scheme;

ii.) How much security is reasonable for that scheme and;

iii.) The mechanism/timelines for both calling upon (using) or releasing the security deposit.

You may need to obtain accurate cost estimates from reliable contractors or other professionals to establish a reasonable amount to hold as security. A detailed breakdown of expenses considered in the calculation of the security will help resolve the matter more quickly. Professional party wall surveyors can assess the work required and provide a comprehensive estimate for this purpose.

The appointed surveyors will document the Security for Expenses provision within a well-drafted Party Wall Award once they reach an agreement. The Award should clearly set out the determination of the surveyors relating to the security.

The Award should include the agreed value of security to be held. It should also specify the procedures and mechanisms for calling upon the security (if necessary) and for releasing it back to the Building Owner, along with the applicable timeframes. 

It should be noted that security can technically be held in any form, whether it be gold, antiquities, or insurance, although the use of insurance for security can be controversial. This is of course uncommon and the traditional approach to holding security is by depositing funds in a client account specifically established for this purpose.

How can Security for Expenses funds be protected?

As an RICS Regulated firm we have an establish client account to hold funds deposited as security of expenses. The RICS provide a system of inspection and regulation of client funds we hold on deposit. Funds held by us as an RICS Regulated firm are given further protection under the RICS Client Money Protection Scheme.

The RICS CMP Scheme provides £10.3m of insurance cover for general client money held by regulated firms. As an RICS Regulated firm Anstey Horne are able to offer a Security for Expenses facility within our client account, covered by the RICS CMP Scheme.

We can offer a Security for Expenses facility even on projects where we are not appointed as the party wall surveyor..

Conclusion : Security for Expenses

Establishing Security for Expenses is becoming more and more common on construction projects across the UK.

Appointing a properly regulated RICS chartered party wall surveyor to assist you in dealing with Security for Expenses is vital in protecting the interests of all parties.

To arrange deposit of Security for Expenses funds, whether or not the Party Wall matter is being handled by our team,  please call our Enquiry line on 020 4534 3135.

Follow the link for a copy of our Client Money Handling Procedure.

Party Wall & Neighbourly Matters Services

Further Party Wall Guidance

For further information on a range of Party Wall subjects, see our recent articles below :

For more information on how the Party Wall Act affects you as a Building Owner or Adjoining Owner, see our Party Wall Fact Sheet.

We have also compiled some Party Wall FAQs and a Glossary of Party Wall terms we often get questions about.

The Party Wall process starts with serving notice, which we cover in greater detail here.

For more information on Security for Expenses please call our surveyors direct on 020 4534 3135.

If you want one of our team to call you please fill in our Contact form. We will give you a call back as soon as we can.

For a quick no obligation Party Wall Quote for your project send us the details of your planned work here.

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