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.

Definition in s12 of the Party Wall etc. Act

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.

UK Government Guidance

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.

‍What are Security for Expenses used for?

Security for Expenses: Historically

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.

Security for Expenses: Nowadays

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:

• 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 and any damage.
• 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 of damage.

‍How much Party Wall Security for Expenses should I be asked to deposit?

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.

Examples

We have seen all sorts of different deposit money account values to cover Party Wall security, 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: £870,000

Is this the same as Party Wall Escrow?

The terms are used interchangeably, but "Security for Expenses" is the legal term contained within s12 of the Party Wall etc. Act 1996.

Where can I deposit my security?

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.

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 us, 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.