In construction law, Section 12(1) highlights an adjoining owner’s right to ask for security from a building owner before starting any work with conferred rights. This became important after the Kaye v Lawrence [2021] EWHC 2678 (TCC) case. Involving proposed piling in Sandbanks, Poole, triggered a dispute under Section 12 -Security for Expenses.

Historically, the provision for such security dates back to Section 87 of the Metropolitan Building Act 1855, continuing through subsequent Acts. Notably, the Green Book’s second edition, on page 106, mentions when security may be requested, but this detail is missing in the third edition on page 102.

Getting into specifics, an adjoining owner can send notice to the building owner, requiring a security agreement before starting work. It’s crucial to note that ‘may’ implies a permissive request, not an absolute right.

The pivotal term ‘notice’ is significant

While often presented by a surveyor, the Act specifies that the adjoining owner should formally request it in writing. Failing to do so might lead to misunderstandings and potential loss of compensation.

Moving to ‘before,’ it emphasizes the need for security to be arranged before work starts, ensuring timely protection in case of damage disputes.

The phrase ‘such security’ lacks clarity on its form, but monetary deposits are commonly assumed. Bonds or insurance policies are options, but they present challenges. An ideal solution involves an Escrow Agent holding money, offering a straightforward process for handling claims and ensuring prompt compensation.

Deciding the deposited amount should align with the nature of the work and be reasonably calculated. Surveyors often suggest figures without a clear methodology. Asking why security is needed and how the amount is calculated becomes essential.

Commonly, security aims to cover potential damages in case of work abandonment. However, the calculation should consider factors like non-completion of works, damages to the adjoining owner’s and occupier’s properties, surveyor costs, and expenses related to specialists. Seeking input from a quantity surveyor ensures a more accurate assessment.

Conclusion

The demand for security for expenses isn’t a one-size-fits-all for every project. Larger projects may need it, while smaller ones might not. Adjoining owners should consider specific risks and evaluate carefully before requesting security. A nuanced understanding of legal terms like ‘may,’ ‘notice,’ and ‘such security’ is crucial for clarity and compliance with Section 12(1).