Payment & Escrow Blog

Understanding Party Wall Escrow & Security for Expenses

As ambitious clients in London dig basements and add storeys to the top of buildings, Party Wall Escrow accounts are more widely used than ever to protect adjoining building owners.

The Party Wall Act etc. 1996 (the 'Party Wall Act') was introduced to protect building owners from works carried out by adjoining owners that might interrupt their use and enjoyment or a party wall or structure.

Security for Expenses

Under s12 of the Party Wall Act:

s12 - Security for Expenses

  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 dispute determined in accordance with section 10; and
  2. Where— (a)in the exercise of the rights conferred by this Act an adjoining owner requires the building owner to carry out any work the expenses of which are to be defrayed in whole or in part by the adjoining owner; or (b)an adjoining owner serves a notice on the building owner under subsection (1), the building owner may before beginning the work to which the requirement or notice relates serve a notice on the adjoining owner requiring him to give such security as may be agreed between the owners or in the event of dispute determined in accordance with section 10.

In summary, if you are carry out works, your neighbour can ask you to provide security into a ring-fenced bank account in case either you cause damage with your works, or you fail to complete them.

Who holds security for costs in a party wall matter?

The Party Wall Act only sets out the nature of a security request; it is silent on how the security should be handled. Accordingly, it is up to the building owner parties to decide how best to protect each of their interests. We propose the safe keeping of security for expenses funds in an escrow account for this purpose.

In certain circumstances, your solicitor can hold the funds, though in recent years the Solicitors Regulation Authority has issued guidance suggesting that if the solicitor is not involved in the underlying transaction, it might be a breach of one of their rules of conduct for the solicitor to hold the funds. This is because solicitors have a limited exemption from the requirement to register with the Financial Conduct Authority (the 'FCA') for the provision of payment services.

We at dospay are specifically regulated by the FCA for exactly this purpose, so we can hold your funds safely for the duration of the works.

How does a Security for Expenses Escrow work?

Once you have appointed a surveyor, and your neighbouring building owner has as well, the surveyors will begin to work together to agree on the sum to be deposited to secure for expenses, and where that deposit should be made.

Escrow Sum / Non-Negligence Insurance

Most household insurance policies offer protection in circumstances where a contractor has acted negligently. There are times, however, when considerable damage can be caused without any negligence. To account for this, specialist 'non-negligence' insurance policies are designed to pay out even if there is no negligence on the part of the contractor.

There are almost always limitations and exceptions in insurance policies. Security for Expenses is designed to address any shortcomings that may exist with a 'non-neg' insurance policy, or to replace it altogether.

Your surveyor will have a view on whether security is appropriate or, indeed, necessary for your particular building needs and whether the adjoining owner is likely to require it.

Seek a no-obligation quote

We offer no-obligation, no-cost quotes for your Party Wall Escrow needs. You can complete our simple form here, and we will usually get back to you on the same day.

Complete our simple compliance checks

We are well-accustomed to working with HNW clients, trust companies and offshore holding companies. Our simple, secure compliance forms are accessible online, 24/7, and make it as easy as possible for us to onboard you.

Once you have opened your first account with us, we are able to open subsequent escrow, construction or security for expenses accounts using our streamlined re-checking process, saving you time and money on your future escrow needs.

Agree the terms and enter into the Escrow Agreement

Use of our precedent escrow agreement is included in your escrow quote. We share this with your surveyors and work with them (and, if required, the adjoining owner's surveyors/solicitors) to agree any necessary amendments.

Once agreed, this can be executed digitally by all of the parties (and us). Generally-speaking, we can get accounts open in as little as 24 hours for UK-resident owners who are happy to agree only minor modifications to the escrow agreement.

Deposit the Security for Expenses escrow sum

When you are ready to begin your works (or as otherwise directed in the Party Wall Award), you will then deposit the sum in the account with the details we provide. You, the adjoining owner (and each of your surveyors) can then access our secure online portal to see the deposits at any time, 24/7.

Release security when directed

When the owner carrying out works to their building has completed those works, and each building owner's surveyor is satisfied that the works have been carried out to a satisfactory standard, each surveyor will confirm the same to us.

Once this is confirmed, we release the deposited security for expenses back to the building owner and proceed to close the account.

Would you like further information?

Request a no-obligation quote for your account. We generally reply within 24 hours and can open accounts in as little as 48 hours.

dospay is a trading name of DOS & Co. Ltd, a company registered in England and Wales with company number 08294966.

DOS & Co. Ltd. is registered with the Financial Conduct Authority under the Payment Services Regulations 2017 (FRN: 833374) for the provision of payment services.  

You can read about the difference between escrow and payment services here

DOS & Co. is a Certified B Corporation