Party Wall Insurance
Party wall insurance a useful tool for the building owner to provide security and peace of mind to the adjoining owner, protecting both should construction work on site cause damage to the adjoining owner's property. This innovative insurance tool is especially useful as it doesn't tie up vast sums of the building owner's cash in escrow (some party wall insurance claims can easily reach £100,000s). Party Wall insurance can help avoid traditional insurance claims delays too, as it is designed with the Party Wall etc. Act 1996 in mind.
Protect yourself from party wall disputes
Having party wall insurance prior to beginning construction works can protect yourself from a future dispute over the quantification of and payout for consequent damage claims from the adjoining owner. According to the Party Wall etc. Act 1996, you have to provide compensation to your neighbours if your construction works cause damage to the adjoining property.
The potential of damages to the adjoining property simply has to be given due consideration, otherwise you could find yourself spending chunks of your cash on legally-obliged amends.
If you're the adjoining owner and you know that (after taking advice) the building owner has taken out Party Wall Insurance, then your appointed surveyor should consider the scope of that insurance against the scope of planned works.
Do not assume that your household insurance covers all aspects of the possible damages during the renovation work. As a general rule, you should consider insurance if you will have to / have already produced a Party Wall Agreement, and work is yet to begin.
As a rule of thumb - the more substantial your project scope, the more consideration you should give to party wall insurance!
Party wall damages
Damage normally occurs within the first 3 to 6 month of the beginning of construction, though understandably this depends on the construction project, and how invasive it could be. Damage has also been known to appear 2 weeks after the project has finished, while materials have settled, while any new structural and ground forces level out.
Common causes of party wall damage
Negligence i.e. poor quality work
Engineers failing to produce accurate calculations
Unknown changes to the building structure
Changes in ground conditions caused by the construction works
Do I need party wall insurance?
No, not necessarily, but before starting any construction work the indemnity limit for the party wall insurance has to be decided on. You have to take into account the expectation of the adjoining owner(s) and the value of their property. The worst case scenario would be receiving a claim for hundreds of thousands of pounds of damages, without clear attribution of the cause.
As an example, the adjoining owner is potentially eligible to claim a compensation payout if changes in the structure of your building have caused any damage to the structure of their property. This payout would be funded by your party wall insurance if it can be clearly shown that the damage wasn't related to negligence on the part of the builder (or the designer). Damage caused by negligence may be covered by the builder or designers' own public liability or indemnity insurance.
For most builders, standard public liability cover is the most suitable option (with cover ranging from £1m to £5m or £10m). If they're to be carrying out basement excavations or conversions, then they'll need to bolt-on specific add-ons to their policy so they're covered for that work. Contractors should get professional advice on the insurance add-ons available in order to cover damages caused by vibrations, structural failures, excavations or removal of supports.
Understandably the building owner should check that any contractor is covered for the work by their insurance company before work begins. Imagine a party wall insurance claim payout being denied on finding out that the contractor wasn't covered for the work they were carrying out!
Party wall insurance cover lasts throughout the project and for a short time after. It's generally believed that, should any damage be caused to the adjoining owners structure, it will appear within a few weeks after construction finishes at the very latest.
How to choose the right party wall insurance?
It is the job of the contractor or architect to make sure that your insurance has been extended to cover all of the potential damages that construction work may cause and to produce any relevant documentation.
It is advisable to contact an RICS Accredited Chartered Building Surveyor for professional advice as a contractor, building owner or adjoining owner, to ensure that you are covered, and for peace of mind.
Should you have already reached a point where there is a party wall dispute, then an RICS accredited party wall surveyor such as Metcalfe Briggs can help to resolve disputes under the Party Wall etc. Act 1996.
If you and your the adjoining owner do not agree on the chosen surveyor you may prefer to have two different people working on your case (see our article on appointing a surveyor). If at the end two surveyors can not agree on the final decision, a third surveyor may be employed to arbitrate. However, the cheaper solution would be to find a person who satisfies both of your interests.
Party wall insurance claims
The building owner should be distanced from decisions regarding compensation, as it should be handled by the surveyor contacting the insurance company directly. Your appointed surveyor will negotiate how the issues should be resolved under the Party Wall etc. Act 1996. A party wall surveyor is independent by way of their accreditation (look for RICS).
If the insurance company for any reason refused to pay the compensation in any amount, it becomes the responsibility of the building owner to pay compensation to his neighbours.
Contact us to get a quote and a professional advice on the party wall insurance.