Security for expenses (section 12)

Security for expenses is one of the less well-known protections in the Act, and one of the most misunderstood. It is not a deposit against all possible damage and it is not a penalty. It is a reasonable safeguard, set at a level proportionate to the risk.

What section 12 says

• Adjoining owner’s right (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 dispute determined in accordance with section 10.”
• Building owner’s right (s.12(2)): where the adjoining owner requires work that they will pay for in whole or part (for example under a counter notice under section 4), or where the adjoining owner has served a section 12(1) notice, the building owner can require the adjoining owner to give security.
• Consequence of not providing it (s.12(3)): if the adjoining owner does not comply with a section 12(2) notice or determination within one month, their requirement or notice ceases to have effect.

Note that the Act does not say the building owner’s work lapses if they fail to give security. But where security has been properly requested, starting work without it would be a breach and would invite an injunction. The Award usually makes the provision of security a condition precedent to starting notifiable work.

When is security appropriate?

Surveyors consider the risk to the adjoining owner if things go wrong. Factors include:

• Nature of the work. Deep excavation, basements, underpinning, demolition and rebuilding of a party wall, and work leaving the neighbour’s building exposed carry more risk.
• Risk of abandonment. If the project stopped halfway, would the neighbour be left with an unsupported wall, an open excavation or no weathering?
• The building owner’s status. A developer company formed for one project, or a building owner who will sell on completion, presents a different risk from an owner-occupier.
• Value at risk. The likely cost of making safe and reinstating the neighbour’s property.

For straightforward domestic works such as a loft conversion or single-storey extension, surveyors rarely consider substantial security justified. Requests are not automatic and surveyors must act impartially.

How security is held

• Escrow or stakeholder account, commonly held by a solicitor or in a dedicated escrow service, with release conditions set out in the Award.
• Joint account in the names of the surveyors or owners.
• Bond or guarantee from a bank or insurer, less common on domestic work.

The Award should state the amount, how it is held, when it can be drawn on, and when it is released (typically after final inspection and settlement of any damage).

How the amount is set

The amount should reflect the realistic cost of putting things right if the work fails or is abandoned: for example, making safe and backfilling an excavation, completing underpinning, or reinstating weathering and support, plus professional fees. It is not meant to cover every conceivable loss. Surveyors often seek an engineer’s or quantity surveyor’s input on larger schemes. We do not quote typical figures because they vary enormously with the project.

Common issues

• Requests made late. Section 12(1) security must be required before the building owner begins work. Serve the notice early.
• Disproportionate requests. Asking for a large sum on a modest project tends to be rejected or reduced by the surveyors.
• Unclear release terms, leading to arguments over when money comes back.
• Confusion with insurance. Security is separate from the contractor’s insurance; surveyors look at both.

Checklist

Adjoining owners:

• Consider whether the work’s risk justifies security.
• Serve a written section 12(1) notice before work starts.
• Explain the basis for the amount you seek.

Building owners:

• Expect a request on basements and major structural work; budget for it.
• Propose a holding arrangement and clear release terms.
• Consider whether a section 12(2) request is appropriate if the neighbour has asked for works for their benefit.

Worked example (illustrative)

Illustrative only. Not a real case; no figures are implied as typical.

A developer company plans a basement beneath a semi-detached house it intends to sell. The adjoining owner, through their surveyor, serves a section 12(1) notice. The developer’s surveyor accepts security is reasonable but disputes the amount sought. The two surveyors obtain an engineer’s estimate of the cost of making safe and completing the underpinning if the project stopped at the most vulnerable stage, and award security at that level plus fees, held by a solicitor in a stakeholder account. Release is tied to the final inspection. Work cannot start until the sum is lodged. On completion, a small sum is drawn to pay for agreed making good and the balance is returned.

At a glance

Security and counter notices

Section 12 works in both directions because the Act sometimes makes the adjoining owner pay. If the neighbour serves a section 4 counter notice asking for extra works for their own benefit, such as chimney breasts, piers or deeper special foundations, they must pay for those works (s.11(9)). The building owner can then require security for that cost under section 12(2)(a) before starting. If the neighbour does not provide it within one month of the notice (or of the surveyors’ determination if disputed), their requirement ceases to have effect (s.12(3)).

What surveyors weigh when deciding a dispute about security

• Whether the work, if abandoned at its worst point, would leave the neighbour’s property unsupported, exposed or unsafe.
• The realistic cost of making safe and completing or reinstating.
• Other protections already in place, such as contractor insurance and a robust method statement.
• Whether the request is proportionate to the work and to the building owner’s circumstances.
• How and when the money will be released, so that the security does not become a source of a second dispute.

Surveyors must act impartially between the owners, whoever appointed them. A well-reasoned request backed by an engineer’s estimate is far more likely to succeed than a round figure.

Drafting the security provisions in an Award

Where security is agreed or determined, the Award should leave no room for argument later. Surveyors typically set out:

• The amount and the date by which it must be lodged, with notifiable work not to start until it is.
• The holder (for example a named solicitor or escrow provider) and who pays the holding costs.
• Drawdown conditions: the circumstances in which the adjoining owner may draw on it, usually abandonment of the work or failure to pay sums determined under the Award, and the need for a surveyors’ determination before release.
• Release: when the balance returns to the building owner, typically after the final inspection and settlement of any damage.
• Interest, if any, and who receives it.

Clear terms protect both sides: the neighbour knows the money is genuinely available, and the building owner knows exactly when it comes back.

If either owner later disputes whether a drawdown is justified, that is itself a matter for the surveyors under section 10.

Sources and further reading

• Party Wall etc. Act 1996, section 4: Counter notices (legislation.gov.uk)
• Party Wall etc. Act 1996, section 10: Resolution of disputes (legislation.gov.uk)
• Party Wall etc. Act 1996, section 12: Security for expenses (legislation.gov.uk)
• The Party Wall etc. Act 1996: explanatory booklet (GOV.UK)

This guide is general information on the law in England and Wales, written from our surveyors’ practical experience. It is not legal advice; for a specific dispute, take advice on your own facts.

Sources: Party Wall etc. Act 1996 (legislation.gov.uk) · The Party Wall etc. Act 1996: explanatory booklet (GOV.UK). Last reviewed 27 October 2026. General guidance on the law in England and Wales, not legal advice.