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Party Wall Act article: Estates Gazette

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12th June 2014

Nicholas Isaac and Edward Glass review the implications of the Party Wall Act 1996 for developers.

Introduction

With an improving economy, the UK is seeing a surge in property development, presenting both transactional lawyers and litigators with a variety of associated legal issues. Potential infringement of rights of light is one highly topical factor but developers should also be aware that neighbours to a development will be keen to ensure that their property is protected from the potential adverse effects of development at or near the boundary. Unlike rights of light, there is already a statutory regime in place, namely the Party Wall Etc. Act 1996 (“the Act”) which regulates the conduct of parties in this area. The Act is complex and so this article is intended only to provide a simple introduction to its provisions and effects.

Even though party walls are at the boundaries between properties and therefore do sometimes feature in boundary disputes, it would be wrong to think of them, or of the Act, as an obstacle to development. Indeed the Act is largely permissive in nature. It confers on the owner of property wishing to carry out work to it (known under the Act as “the building owner”), the right to carry out works which would otherwise, and at common law, constitute trespass and/or nuisance against the owner of neighbouring property (“the adjoining owner”). It also provides ancillary rights for a developer and his surveyor to enter (on notice) adjoining land under section 8. These rights are balanced by corresponding obligations on the part of the building owner, for example to carry out the works without causing unnecessary inconvenience to the adjoining owner, and to compensate the adjoining owner for any loss or damage caused – sections 7(1) and (2).

Is the Act engaged by proposed development?

The Act is engaged in three main circumstances:

1. Where a new wall is to be built astride the boundary line where there was no wall previously (section 1);
2. Where works (of various descriptions set out in detail in section 2(1)) are to be carried out to an existing party wall or structure; and
3. Where excavations are going to be carried out by the building owner within prescribed distances of any structure on the adjoining owner’s property (i.e. where there is likely to be a risk of structural damage to the adjoining owner’s property). (section 6).

Developments will usually engage at least one, and may engage all three of these circumstances. A basement extension for example is likely to engage both section 2 and section 6, given that underpinning of an existing party wall and excavation immediately adjacent to that wall will be required.

Timeline

It is crucial for developers to investigate whether and to what extent the Act will be engaged at as early a stage as possible. This is because the right to carry out works under the Act only arises after requisite notices have been served by the building owner on the adjoining owner, and either (1) written consent to the proposed works has been obtained, or, more commonly, (2) the dispute resolution procedure under section 10 of the Act has run its course.

Although notices (under section 1, section 3 or section 6(5)) must be served in advance of works commencing (with a variety of different notice periods), the problem for developers is more commonly the “deemed dispute” provisions contained in sections 5 and 6(7). Under these provisions, where an adjoining owner does not consent to the proposed works within 14 days, the Act deems a dispute to have arisen between the building owner and the adjoining owner. Such a dispute must then be resolved by the dispute resolution procedure under section 10.

Section 10 requires that all disputes be determined by means of an “award” made by surveyors. An award is analogous to a judgment in that it is a written document which sets out the rights and responsibilities of the two owners in respect of the proposed works. Although the parties can appoint a jointly agreed surveyor (unsurprisingly called “the agreed surveyor”) to make such award, it is more common for the parties to each appoint their own surveyor, and for those two surveyors to appoint a third surveyor (called “the third surveyor”), whose primary responsibility is to adjudicate between the other two surveyors when they are unable to agree between themselves. Section 10 also provides for the owners to have a statutory right of appeal to the County Court against an award.

The key point to bear in mind from a developer’s perspective is that obtaining an award, even where that award is not subsequently appealed, can be a very time-consuming process, often taking months rather than weeks. Consequently, developers should not only ensure that notices under the Act are served several months ahead of the intended start date for works, but also that as much information as possible is provided to adjoining owners at the notice stage. The former ensures that there is adequate time to deal with any disputes which may arise, the latter seeks to reduce the scope for such disputes to arise in the first place, and to encourage consent to be given in the first place. Finally, the developer may be well advised to approach adjoining owners first, even before serving notices, to encourage co-operation from the adjoining owner.

Who are the adjoining owners?

A developer may well need to deal with more than one adjoining owner under the Act, serving notices on them all, and so it is important to identify all adjoining owners as early as possible. As well as freehold owners of adjoining property, lessees with an interest greater than a yearly tenancy (including for example tenants on a two-year assured shorthold tenancy) are also adjoining owners for the purposes of the Act.

Where there are multiple adjoining owners, and particularly where the adjoining owners each appoint different surveyors (as they are entitled to do) it is obviously necessary to allow even more time in advance of the commencement of the works to ensure that the developer will be in a position to start work on time.

Bypassing the Act?

The statutory rights available to a developer can ultimately facilitate development, permitting what otherwise may be a nuisance or trespass, and preventing the developer being “held to ransom”. However, notice provisions are strict and subsequent awards limited and defined by reference to specific plans and time limits. With such constraints, can a developer bypass the strictures of the Act, negotiating with adjoining owners outside its scope, and possibly obtain a more flexible form of consent?

The Act is silent on whether the parties can circumvent the Act by coming to an informal agreement. In Seeff v Ho [2011] EWCA Civ 186, the Court of Appeal considered the nature of an agreement in lieu of notice. Thomas L.J made it clear that although consent was highly desirable, the person giving consent:

“….would obviously expect that, if planning permission was required or consent under the Party Wall Act was needed, the processes would be put in train and the obligations imposed by the planning authorities or under the Party Wall Act observed as a condition of consent.” (para. 31)

Furthermore, Thomas L.J went on to add at para. 56 that: “The Act makes it mandatory to give notice in respect of work defined in the Act.” The view that building owners cannot opt out of the provisions of the Act is supported by an earlier decision regarding the Metropolitan Building Act 1855, in which Crowder J said the contract should be void as it: “was entered into and carried into effect in express violation of the Metropolitan Building Act” (Stevens v Gourley (1859) 141 E.R. 752).

However, while oral consent to works does not relieve the building owner of an obligation to serve notice in respect of those works, this does not mean that consent or agreement has no place under the Act. First, the Act expressly provides for written consent to be given to the works descrbied in a notice, after that notice has been served – for example section 1(3), 5 and 6(7). Secondly, it appears that it is open to the parties to contract into a dispute resolution mechanism other than that provided for by section 10 of the Act. In Dillard v F&C Commercial Property Holdings Ltd [2014] EWHC 1219 (QB) Akenhead J was apparently content that effect should be given to an agreement between the parties which he had construed as requiring them to have an expert determine compensation caused by notifiable work.

What are the consequences of non-compliance?

For developers the most obvious and potentially damaging consequence of non-compliance with the Act is the risk of an injunction preventing works going ahead until the necessary formalities have been complied with. Damages, whether based on nuisance, trespass, or breach of statutory duty will also be recoverable by the adjoining owner when a building owner does not comply with his obligations under the Act. As the case of Roadrunner Properties Ltd v Dean [2004] 1 EGLR 73 makes clear, courts are encouraged to take “a robust approach to causation” in such circumstances.

The injunction granted to the Claimant in Histed v Prosperity Developments [2013] EWHC 4463 (QB) is a cautionary tale for developers who show a cavalier disregard for their obligations under section 6. Where notifiable works have commenced without notice being served, courts will not hesitate to grant an injunction stopping them.

The court has also demonstrated its readiness to grant final injunctions requiring the removal of unlawful works. In Daniells v Mendonca (1999) 78 P&CR 401 the Court ordered the removal of an extension which relied on the support of a wall found to be entirely on the Claimant’s own land.

Conclusion

Not only should developers be aware of the requirements of the Act in terms of notice and the subsequent process of obtaining awards, but they must take steps to ensure that the statutory requirements of the Act are addressed at as early a stage as possible in the development process. Advisers, in encouraging compliance, should also emphasise the potential benefits of the Act in facilitating development works

Why this matters?

The rights of adjoining landowners are one of the many issues for a developer to consider in advance of proposed work on or close to a boundary. Fortunately the statutory framework of the Party Wall Act 1996 exists to facilitate work in a manner that protects the interests of neighbouring owners and, in the event of dispute, provides a means for resolution without recourse to the courts. However, the compliance requirements (especially notice periods) in the Act are strict, and typically there is significant uncertainty over how adjoining owners will respond to the developer’s proposals (which in turn, increases where development work impacts multiple adjoining owners, all with rights under the Act). For a developer, forward-planning is essential to avoid unwelcome and costly delay.

“The Law and Practice of Party Walls” by Nicholas Isaac – www.yourbarrister.com

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