12 Security for expenses.
(1) 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.
(2) Where—
(a) in the exercise of the rights conferred by this Act an adjoining owner requires the building owner to carry out any work the expenses of which are to be defrayed in whole or in part by the adjoining owner; or
(b) an adjoining owner serves a notice on the building owner under subsection (1),
the building owner may before beginning the work to which the requirement or notice relates serve a notice on the adjoining owner requiring him to give such security as may be agreed between the owners or in the event of dispute determined in accordance with section 10.
(3) If within the period of one month beginning with—
(a) the day on which a notice is served under subsection (2); or
(b) in the event of dispute, the date of the determination by the surveyor or surveyors,
the adjoining owner does not comply with the notice or the determination, the requirement or notice by him to which the building owner’s notice under that subsection relates shall cease to have effect.
The gov.uk Guidance Note provides:
If there is a risk that you will be left in difficulties if the Building Owner stops work at an inconvenient stage, you can request them, before he starts the notified work, to make available such security as is agreed (or if not agreed determined by the surveyor/s), which may be money or a bond or insurances, etc. that would allow you to restore the status quo if he fails to do so.
The money remains the Building Owner’s throughout, but if, for example, you need to have a wall rebuilt, you, or more commonly the surveyors, can draw on that security to pay for the rebuilding.
This provision is usually reserved for particularly intrusive or complex works.
Previously, it was assumed that Security for Expenses only covered the risk of an owner halting work—either briefly or permanently—before the notifiable work was finished, thereby leaving the neighbouring property potentially unsafe.
Now, it is generally recognised that security can also be used to cover the risk of damage caused by the works, as well as other related costs that may arise.
While the Party Wall Act does not explicitly state what Security for Expenses should cover, it is generally accepted that it may include:
The type and amount of security is typically agreed by the two owners.
However, if they cannot reach an agreement, 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 owner’s ability (or inability) to cover any potential losses. This concern is particularly relevant if the owner is a limited company with unknown, minimal or no assets, or is an offshore entity.
We have seen all sorts of different deposit money account values to cover Party Wall security, including:
The terms are used interchangeably, but "Security for Expenses" is the legal term contained within s12 of the Party Wall etc. Act 1996.
The UK Security for Expenses Scheme enables anyone to open an account and deposit their security, held safely at the Bank of England, for free. Open an account here.