S 12(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 a dispute determined
in accordance with section 10.”
• the judgement in Kaye –v- Lawrence
considered “exercise of the rights conferred by this Act”. The case
confirmed that section 12(1) is not limited to section 2 rights and applies
to all works in pursuance of the Act – ie section 1, section 2 and section
6.
• In paragraph 63
of the Judgment, the Judge said:
“….the carrying out of works within three or six
metres of the boundary would be as likely to cause loss or damage so as to
justify security as would works carried out under section 6(3) or other
provisions of the 1996 Act. Further, in cases where work is being
carried out under a number of sections of the Act, it does not make sense to
grant security for some works but not other works when ……. liability for
loss and damage under section 7(2) would apply to all
works.”
• The word
“expenses” is not used in section 12(1); the term used is simply
“security”.¹
• Contrast sections
12(1) and 12(2). In 12(1) security may be requested where the Building
Owner “begins any work in exercise of the rights conferred by this Act…”.
In contrast s 12(2) : Where “….an adjoining owner requires the
Building Owner to carry out any work the expenses of which are to be
defrayed…….by the adjoining owner, ..”
Section 12 (1) could have limited the Building
Owner’s obligation to occasions where the Building Owner is exercising
rights where the Building Owner has an ancillary obligation to make good
damage and to pay expenses to the Adjoining Owner in lieu if requested.
It doesn’t, which suggests that the intended scope of 12(1) is
wide.
• See also
Bickford-Smith paragraph 12.2:
“The right to claim security is not
expressly limited in any way. It is considered that it extends not
only to the works which will be carried out, but to any claim to which
their execution may give rise under the Act (including compensation
under section 7(2) and an allowance for disturbance under section 11(6)
or otherwise.”
AND
• Andrew Smith, Child and Child –
Compensation Disturbance Inconvenience – paper given to Thames Valley P
& T 26 September 2007.
“The surveyors’ power to give security is
expressed in terms wide enough to include security for any compensation
which they predict may be payable under the Act…….” -
.
Matters to be considered
Bickford-Smith
subdivides this into two parts:
Part 1
– related to work:
• Costs that may fall on the Adjoining
Owner if the Building Owner having commenced awarded work is unable to
complete it
• Amounts the
Adjoining Owner may become entitled to by reason of works carried out – eg
compensation under section 7 (see also A Smith’s views in above paper that
the scope of compensation to be awarded is very wide, including potential
loss of trade, loss of view etc.)
• Amounts due to the Adjoining Owner under
section 1(7)
• Disturbance
allowance under section 11(6) Note.
Bickford-Smith considers it to be appropriate for security to be
awarded for anticipated damage either by way of section 11(8) or section
7(2).
Part 2 – relating to the Building
Owner:
•
Financial
standing
• Geographical
location • Quality of
documentation • Standing of
professional team and contractor
Calculation of amount
(Sum of potential
liabilities relating to work) x (risk factor %) x (Building Owner factors
%)
Conclusions in relation to
security by the Building Owner for the Adjoining Owner
1. Works under sections 1 and 6 of the Act
are works “in exercise of rights under the Act” – see Kaye v Lawrence.
2. The notion that
Kaye –v- Lawrence did not consider the argument as to whether security can
be awarded for compensation is wrong; the issue was considered as
paragraph 63 of the judgement makes clear.
3. It may not be appropriate to award
security for anticipated damage arising from works unless damage to the
Adjoining Owner’s building is certain and/or the standing of the Building
Owner is such that it is likely that any financial claim would not be
honoured.
4. It is appropriate
to award security for compensation due to Adjoining Owner under section 7(2)
– because of item 1 above but also because section 7 (2) compensation
applies to “any works executed in pursuance of the Act”. This includes
section 2(2) rights/works.
5. Debate about security has so far been
limited to consideration of security against expenses of making good damage.
This is too narrow. The Adjoining Owner’s rights for non
damage-related compensation² must also be considered as must the Building
Owner factors.³
6.
Following
notice by the Adjoining Owner to the Building Owner, the extent of security
to be awarded should be calculated by reference to the formula above.
These conclusions depart from
established P & T opinion that security should only be awarded for fair
allowance (s 11(6)), but does this matter?It must be remembered that although the
Adjoining Owner may request security there is no automatic obligation for
the Building Owner to pay it if he considers the sum wrong. It is for
the surveyors to award compensation and to do so after applying the factors
set out above. In most cases, therefore, security will be £nil or a
very small sum because:
• Work is unlikely to cause damage;
• The Building Owner is of good standing
and has competent contractor and professional team; • Most works do not give rise to immediate
compensation under section 7(2)
AND
If the Adjoining Owner disagrees with the Award
it can be appealed.