What is Security for Expenses?
Security for Expenses is a financial safeguard against expenses that may arise as a consequence of works carried out under the Party Wall Act.
For example, if a substantial excavation were abandoned before the structure was properly completed, the Adjoining Owner could face considerable expense making their property safe.
Security is commonly provided as a sum of money held independently until agreed conditions for release are met.
It is not an additional payment automatically made to the Adjoining Owner, nor is it a penalty imposed on the Building Owner.
Who can request it, and when?
Under Section 12(1), an Adjoining Owner may serve Notice requiring the Building Owner to provide security before beginning works in exercise of the rights conferred by the Act.
The security is agreed between the owners or, in the event of dispute, determined in accordance with Section 10.
Section 12(2) also allows a Building Owner to require security from an Adjoining Owner in certain circumstances.
These include where the Adjoining Owner requires works whose expenses are to be paid wholly or partly by them, or where the Adjoining Owner has served a security request under Section 12(1).
The precise statutory circumstances and requirements must be considered.
When might Security for Expenses be appropriate?
Although Section 12 is not limited to basements, it is particularly relevant where substantial structural works create potentially significant financial consequences.
Examples include:
- Basement excavations beneath or close to neighbouring properties.
- Underpinning existing party walls.
- Deep excavations requiring extensive temporary works.
- Construction where abandonment could leave adjoining structures needing protective measures.
The amount and form of security should reflect the relevant expenses that may reasonably need to be secured, rather than simply the overall project construction budget.
When security may warrant consideration
Project
Potential concern
- Basement excavation
- Abandoned excavation could leave neighbouring structures requiring protection.
- Underpinning a party wall
- Incomplete underpinning could leave a shared structure without adequate support.
- Deep excavation and temporary works
- Unfinished works could create substantial making-safe costs.
- Works leaving an adjoining structure exposed
- Protective work may become necessary if construction is interrupted.
Who decides how much security is required?
The owners may agree the amount and arrangements directly.
Where they cannot agree, the dispute may be determined by the appointed surveyor or surveyors under Section 10.
Depending on the project, this may require consideration of:
- Engineering information.
- Temporary works proposals.
- Relevant construction methodology.
- Costs associated with making an affected structure safe.
- The circumstances in which the security might be called upon.
The arrangement should identify what is being secured, how the funds are held and the conditions for their release.
What if the security is not provided?
The statutory consequences depend on who has requested security and under which part of Section 12.
Section 12(3) contains a specific one-month consequence where an Adjoining Owner fails to comply with a Building Owner's request for security under Section 12(2).
In that situation, the Adjoining Owner's requirement or Notice to which the Building Owner's security request relates ceases to have effect if the Adjoining Owner fails to comply within the applicable statutory period.
This should not be confused with a general rule that a Building Owner's original Party Wall Notice automatically lapses if security requested under Section 12(1) has not been provided.
Where a Building Owner has been required to provide security under Section 12(1), the appropriate statutory position and arrangements should be addressed before the relevant works proceed.
How is the money held?
At Christopher Anthony Surveyors, we use Security for Expenses Ltd for appropriate independent escrow arrangements.
Website: https://www.securityforexpenses.co.uk/
Where security is provided as a cash sum, the funds can be held independently rather than personally by either owner.
The provider, amount, conditions and release arrangements are established as part of the agreed or determined security arrangements.
A typical process is:
- A request for security is made.
- The amount and terms are agreed or determined.
- The required funds are deposited with the independent escrow provider.
- The money is held during the relevant construction period.
- Funds are released in accordance with the agreed terms or an appropriate determination.
This provides clear separation between the security and the interests of either owner.
How cash security is typically held
We use Security for Expenses Ltd as our specialist escrow provider. Escrow is one way of holding security; it is not the only form the Act allows.
When is the security released?
The release conditions should be established when the security arrangements are agreed.
On substantial basement projects, they may be tied to the satisfactory completion of specified stages, such as excavation, underpinning or basement construction.
Depending on the arrangement, the surveyors may need to consider relevant information before authorising release.
Security should not remain in place indefinitely without justification, but it should not be released before the applicable conditions have been satisfied.
What should you do next?
If you're planning a basement or major excavation, or your neighbour has proposed substantial works affecting your property, we can advise on the Party Wall process and whether Security for Expenses needs to be considered.
Related guides: Special Foundations and Consent · What Is a Third Surveyor? · Party Wall Notices Explained: Types and Timescales
