Party Wall Act – New Legal Precedent Ruling

In Kaye V Lawrence, a new precedent has been set that enables an adjoining owner to require a building owner carrying out work (governed by the Party Wall Act) to lodge a sum of money as security before he begins any works. 

Section 12(1) states that “An adjoining owner may serve a notice requiring the building owner before he begins any work in the exercise of his rights conferred by the Act to give security as may be agreed between the owners or in the event of dispute determined in accordance with section 10.”

This appeal case considers the extent to which security may be required under section 12(1) of the Party Wall etc Act 1996 (‘the 1996 Act’).

Mr Lawrence intended to carry out works on his property in the famous Sandbanks peninsular area of Poole.  As the works were to be built within 3 and 6 metres of the neighbouring property at a particular depth defined by the 1996 Act, he appropriately served a notice on his neighbour (Mr Kaye).

Mr Kaye responded to the notice challenging the works.  This confirmed that a dispute had therefore arisen and he appointed a surveyor for the purpose of resolving the dispute in accordance with section 10 of the 1996 Act.  Mr Lawrence also appointed his own surveyor. 

The surveyors could not agree and a third independent surveyor was appointed to determine the dispute.

The item that gave rise to this appeal was a request from Mr Kaye that Mr Lawrence provide a bond or project-specific insurance policy in respect of potential damage to his property during the course of the works to Mr Lawrence’s property.

The third surveyor held that the bond could not be requested under section 12(1) of the 1996 Act unless the building owner intended to exercise rights conferred by the Act in carrying out work actually on or to the adjoining owner’s land.  That was not the case in this instance.  This was in accordance with perceived convention as supported by the Party Wall Explained by the Pyramus and Thisbe Club.

Mr Kaye appealed to the Technology and Construction Court (‘TCC’), submitting that an adjoining owner has the right to request security from a building owner if they intended to carry out any work in relation to the act and that this is not dependant upon the building owner carrying out work to or on the adjoining owner’s land. 

The appeal judge, Mr Justice Ramsey, therefore had to decide the interpretation of the phrase “any work in the exercise of the right conferred by this Act.”  He held that, in accordance with the ‘plain meaning rule’ as well as the commonsense construction rule when interpreting statutory provisions, the statutory wording meant all works carried out were covered by the Act and not as had previously been considered.

Accordingly, Mr Justice Ramsey found that the third surveyor misinterpreted the law in construing section 12(1) of the 1996 Act and as a result, the award should have read that:

“A bond or other form of security can be requested under section 12(1) of the Party Wall etc Act 1996 where the owner intends to exercise rights conferred by section 6(1) or 6(2) of the Act and section 12(1) applies where the building owner is proposing under the provisions of the Act to carry out work to his land or work to the adjoining owner’s land.”    

This case possibly creates a large cash flow problem for some parties needing to carry out works where the Party Wall Act 1996 procedures are the protocol for procedure.  If the adjoining owner requires security for possible damages or requires security for their professional expenses, these can be required before the works proceed.  

It is also worth noting that appeals from an award of the third surveyor under the 1996 Act are to be commenced in the County Court.  However, here, the parties applied to have the matter transferred to the TCC at the High Court in London.  Mr Justice Ramsey considered the legislation relevant to his jurisdiction and held that given the importance of the matter and the fact that the parties were in agreement that the appeal should be determined in the TCC in London.

Geoffrey Kaye v Matthew Lawrence  [2010] EWHC 2678 (TCC), 26 October 2010, Mr Justice Ramsey. 

25th February 2011