Don’t be Left Holding the Baby – Section 12 of The PWA

The Party Wall Act grants wide ranging rights to Building Owners, for example, an Adjoining Owner can be happily going about his business when a notice drops on the doormat informing him that in 2 months time his neighbour will demolish the wall that divides their properties; whether he likes it or not.

The Adjoining Owner’s immediate concerns will probably focus on the noise, the dust and the risk of damage but what about the risk that having demolished said wall the Building Owner cannot re-build it because he has run out of money or his contractor has disappeared? Fortunately there is a way for an Adjoining Owner to safeguard against such a scenario and it’s set out in Section 12 of the Act.

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.

You will see that the request goes from Adjoining Owner to Building Owner and the appointed surveyors only become involved if the Owners cannot reach agreement. A short letter along the following lines should suffice:

Dear Building Owner,

I refer to your notice dated xx.xx.xx.

While I hope that, once commenced, the proposed works get completed without delay I am concerned about the possibility that, for one reason or another, they do not and my property is left exposed.

I therefore request Security for Expenses in the sum of £x,xxx in accordance with Section 12 of The Party Wall etc. Act 1996.

I am happy to discuss but should we fail to agree this matter I understand that it passes to our respective surveyors to resolve.

Kind Regards

Adjoining Owner

The amount requested should equate to the cost of returning the Adjoining Owner’s property or the party wall to its original condition or progressing the Building Owner’s works to such an extent that the risk is removed; there’s no reason why the appointed surveyors cannot assist in calculating the sum. It would also to be sensible to make some allowance for the surveyors’ time in agreeing and authorising the release of the funds.

If a sum is agreed it will typically be placed in an independent account – this will often be the client account of one of the surveyors’ solicitors but can be the account of any solicitor that they can agree on. Escrow accounts are often mentioned in this context but in my experience Escrow Agents are not common in this country. The funds remain in the account until the surveyors are agreed that the risk has passed when it is returned to the Building Owner.

If the Adjoining Owner’s fears are realised and the work does not get completed he may draw upon as much of the security as is necessary. The surveyors will normally add a clause to the Awards stating that the funds can only be released, to either Owner, upon the signature of 2 of the 3 surveyors (meaning the appointed surveyors and the Third Surveyor).

Part 2 of this post will look at some recent case law that has extended the scope of Section 12 and examine some typical scenarios where security is likely to be deemed appropriate by the surveyors.