By Legal Futures Associate dospay
What is Security for Expenses?
Security for Expenses arises in the context of building works being carried out by a building owner who shares a party wall with a neighbour.
The Party Wall Act allows the adjoining neighbour (who is not carrying out the building works) to require the building owner to deposit a sum with an independent third party for the duration of the works to be used to restore the status quo if the works are discontinued prematurely or start to cause structural difficulties while underway.
Usually reserved for the most intrusive or complex of works, they are becoming increasingly prevalent in where basement excavations are involved.
What can Security for Expenses be used for?
While the Party Wall Act does not explicitly state what Security for Expenses should cover, it is generally accepted that it may include:
- Repairs to an adjoining owner’s property if damage is caused by the building owner’s works.
- Expenses required to make the adjoining owner’s property safe if the building owner abandons the project.
- Temporary accommodation costs and any related fees, should these be necessary.
- Professional fees connected with resolving the dispute.
- Alterations or reinstatement of the building owner’s works, especially if the building owner fails to finish them, leaving the adjoining owner’s property at risk.
How is Security for Expenses calculated?
Typically, the amount is agreed between the two building owners. If they cannot agree, however, the surveyors involved will resolve the matter by issuing an award under section 10 of the Party Wall Act.
Where major works are planned, such as digging out a basement, it makes sense that the adjoining owner should not have to worry about the building owner’s ability (or inability) to cover any potential losses. This concern is particularly relevant if the building owner is a limited company with unknown, minimal or no assets, or is an offshore entity.
Security For Expenses: examples of amounts
We have seen all sorts of different values, including:
- For a loft conversion in Kent: £1,000
- For a basement excavation in Belgravia: £35,000
- For a basement excavation in Hampstead: £50,000
- For a basement excavation Belgravia: £45,000
- For a basement excavation in Holland Park (with 5 neighbours): £870,000
Introducing the Security for Expenses Scheme
The Security for Expenses Scheme is a new, independent deposit service designed to assist building owners in the United Kingdom with depositing the necessary security under a Party Wall Award. This service is managed by dospay, established escrow agents registered with the Financial Conduct Authority for the provision of payment services.
The Scheme offers a straightforward, accessible, and entirely cost-free method for building owners to comply with their obligations under the Party Wall etc. Act 1996.
All deposits are held at the Bank of England, ensuring they remain liquid, unencumbered, and fully protected throughout the duration of construction works.
Key features of the security for expenses scheme
- Security: All funds held at the Bank of England.
- No charges for users: The Scheme operates without any fees for users.
- Eligibility: The Scheme accepts any signed Party Wall Award for a contemplated building project within the UK that requires the deposit of security.
- Transparent terms and conditions: The Scheme operates under clear and straightforward Scheme Rules, providing clarity and comfort to all users.
- No hidden costs: There are no hidden fees associated with the service.
Building owners can open an account and deposit their security through the Security for Expenses Portal, available 24/7.
Opening a free Security for Expenses deposit account
The first-time compliance checks are streamlined, requiring only essential information and a signed Party Wall Award specifying the security amount.
