Security for Expenses

Definition

Security for Expenses under the Party Wall etc. Act 1996 is a financial safeguard that an adjoining owner can require from the building owner before certain works begin. It ensures funds are available to cover the adjoining owner’s potential costs if the works cause damage, are abandoned, or require corrective measures.

Why it matters

This provision is designed to protect the adjoining owner from the financial risks associated with building works next to their property. It prevents situations where a building owner starts work but cannot afford to finish it, rectify damage, or address structural issues caused by the works.

The amount of security is typically determined by the appointed party wall surveyor(s) and should be proportionate to the potential exposure.

How Security for Expenses works

1. Request – The adjoining owner formally requests security for expenses through the party wall process.
2. Determination – Party wall surveyor(s) assess the likely risk and determine the sum required.
3. Deposit – The building owner lodges the amount in an agreed form, often an escrow account operated by a neutral third party. The UK Security for Expenses Scheme, run by DOS & Co., offers free Security for Expenses accounts, with all deposits held at the Bank of England.
4. Access – Funds are released only if needed to cover legitimate costs due to the building works.
5. Return – If unused, the security is returned to the building owner once works are complete and the surveyor(s) confirm no claim is necessary.

Examples and use cases

• Basement excavations – Covering the risk of underpinning failure or delayed reinstatement.
• Structural alterations – Providing funds in case of damage to party walls or shared foundations.
• Major extensions – Protecting against incomplete work that leaves adjoining property exposed.

Mini-FAQ

Q: Who decides the amount of the security?
A: The appointed party wall surveyor(s) decide, based on the scope and risk of the proposed works.

Q: Is it always held in cash?
A: Usually yes, in a safeguarded or escrow account. Other forms (e.g., bank guarantees) can be agreed but are less common in practice. The UK Security for Expenses Scheme, run by DOS & Co., offers free Security for Expenses accounts, with all deposits held at the Bank of England.