Party Wall Works: How Security for Expenses Can Keep You Covered

Security for expenses ensures peace of mind for both parties during construction, by ring-fencing funds in case of damage or incomplete works.

An Introduction to Security for Expenses
In simple terms, security for expenses is a temporary cash reserve that is set aside while building work takes place on or around a shared boundary. It offers a financial safeguard in Party Wall matters by making sure there is money available if problems arise or if certain agreed works remain unfinished.

Overview of the Party Wall Act and Security for Expenses
Under the Party Wall etc. Act 1996 (“Party Wall Act”), anyone undertaking building work close to a shared wall or boundary must follow specific procedures to protect both owners. Section 12 of the Act allows either the property owner doing the work or their neighbour to request a lump sum—labelled as ‘Security for Expenses’—to cover any potential damage or incomplete work. These funds are generally placed in a separate, restricted account until the appointed surveyors confirm that the job has been completed satisfactorily.

Who Holds the Funds?
The Party Wall Act does not specify who should safeguard the money or how exactly it should be managed. You and your neighbour must agree on suitable arrangements. Some people engage independent escrow services, including specialist schemes like the UK Security for Expenses Scheme, which offers free escrow services, securing your expenses at the Bank of England.

Solicitors can also hold such funds under certain regulations, and various companies authorised by the Financial Conduct Authority (“FCA”) are also equipped to operate escrow accounts for this purpose, though most will charge a fee.

How Security for Expenses Escrow Works

1. Agreeing the Deposit: Each owner appoints a surveyor. Together, they decide how much should be deposited and identify where it will be held.
2. Escrow versus Insurance: Most home insurance policies cover accidental damage through negligence, but non-negligent losses may not be included. Security for expenses provides a more comprehensive layer of protection, either alongside or in place of additional insurance.
3. Creating the Account: After straightforward checks, the escrow provider sets up an account. An Escrow Agreement is signed by all involved, outlining the terms and conditions.
4. Placing the Funds: When construction is ready to commence, the agreed sum is paid into the escrow account, with all parties able to track it.
5. Returning the Money: Once the surveyors confirm that the work meets the agreed standards, the deposit goes back to whoever paid it.

Next Steps
You can open a no-cost Security for Expenses account via the UK Security for Expenses Scheme. To begin, simply visit their portal and follow the instructions provided.

Peter Hillyard – Client Operations Manager

Dos & Co.