Designing Buildings - User contributions [en]

Security for expenses under the Party Wall Act

2026-02-26T11:39:00Z

Peter Hillyard:

The meaning of ‘Security for Expenses’ under section 12 of the Party Wall etc. Act 1996, the rights of both an owner and adjoining property owner and, any impact it may have on the costs associated with the works.

= Introduction =

Security for expenses is a specified sum of money that is placed in a secure account to cover any future damage and/or expenses that may arise from the proposed building works to be carried out by a building or adjoining owner of the property.

Under section 12(1) of the Act, an adjoining owner is entitled to serve a notice that would require the building owner carrying out the works to give security of a sum that may be agreed between the parties, failing which, under section 10 of the Act, a sum may be determined by the appointed party wall surveyor(s).

Under section 12(2) of the Act, the building owner is also entitled to request security from the adjoining owner where the adjoining owner requires the building owner to carry out works the costs of which lay with the adjoining owner, or, where the adjoining owner has served a notice under section 12(1) above. Again, if either or both of the owner’s failure to agree a sum, the appointed surveyor(s) may determine one.

Under section 12(3) if an adjoining owner fails to comply within 1 month of service or determination of section 12(2)notice, any security notice that the adjoining owner had served on the building owner under section 12(1) will cease to have an effect.

= What does ‘security for expenses’ actually cover? =

Until 2011, the common practice was to ensure that enough funds were in place to cover any structural risks and/or damage to an adjoining owners property as a result of a building owner failing to complete the agreed works to the adjoining owner's property.

As stated on page 106 of the [https://www.wildy.com/isbn/9780955845406/the-party-wall-act-explained-a-commentary-on-the-party-wall-etc-act-1996-2nd-ed-paperback-the-pyramus-thisbe-club Party Wall Explained (2nd Edition) (The Green Book)]: “Security can only be requested if the building owner intends to exercise rights “conferred by this Act”, i.e. he is proposing to carry out some work to the adjoining owner’s land or property. If he is simply excavating his own land then the adjoining owner has no right to receive security under this section.”

However, in the case of Kaye v Lawrence, the extent to which security may be required was determined by the court to include any works carried out on the building owner’s property that are covered in the Act, thereby overriding the traditional practices used by the surveyor’s following the guidelines in The Green Book. The decision further states that all and/or any liability for loss or damage arising from works carried out under rights conferred to an owner by the Act.

In layman’s terms, this means that any costs associated with the works being carried under the rights conferred by the Act are recoverable. This might include costs that are reasonably incurred making good any damage caused, temporary accommodation costs, professional fees, damages and court fees.

Security for expenses usually arises when works including, basement excavations, underpinning or extensive structural works, increase the risk of structural damage.

The costs associated with security under section 12 can be substantial, usually ranging from £50,000 to £100,000. There have been many instances whereby, the burden of costs associated with the security expenses has prevented a building owner from commencing the construction works. Those who are able to place security funds on account or provide indemnity insurance cover for security might have to part with significant sums of money prior to any works commencing, thus adding further unexpected costs to the works being carried out.

Either way, security for expenses is a complex matter that should be considered by your appointed Party Wall Surveyor who will scrutinise the sums being requested and determine whether the sums are fair and reasonable before being agreed within a Party Wall Award.

If you or your adjoining neighbour is planning to undertake any building works that you have reason to believe may incur security expenses, contact an experienced party wall surveyor to discuss, in the first instance, the site-specific facts that may require such protections to be taken into account.

For related articles on Security for Expenses, please see: [https://www.securityforexpensesscheme.org/articles https://www.securityforexpensesscheme.org/articles]

= Related articles on Designing Buildings =

* 10(4) Party Wall Surveyor Appointments.
* Adjoining buildings definition.
* Adjoining owner.
* Construction covered by the Party Wall Act of 1996.
* Institute of party wall surveyors.
* Party structure notice.
* Party wall act.
* Party wall notice.
* Party wall surveyor.
* Responsibility for boundary features.
* Right of entry.
* Right of support.
* Right to access land.
* Three party wall notice responses.
* What approvals are needed before construction begins.
* Who Pays for Party Wall Surveyor's Fees?

[[Category:DCN_Guidance]] [[Category:Property_law]]

Digital project bank accounts

2025-07-31T10:46:13Z

Peter Hillyard: Protected "Digital project bank accounts": Protecting content ([edit=author] (indefinite))

= Why choose a digital Project Bank Account? =

Project Bank Accounts (PBA's) have long been championed as a mechanism to guarantee timely and transparent payments within complex construction and infrastructure projects. By ring-fencing money and distributing payments directly to subcontractors and suppliers, they provide assurance across the supply chain. In the public sector, they are very popular, and they are gaining popularity in the super-prime private sector as well. But traditional PBA's have often suffered from reputational issues: slow to establish, expensive to administer, and lacking in transparency.

The emergence of digital PBA's has changed the landscape. Delivered through streamlined, online platforms and structured to improve compliance and oversight, they offer the same fundamental benefits (protection, transparency, and certainty) but with a modern approach to speed, access, information sharing and usability. This article explores the distinctive value of digital PBA's, and what to consider when selecting a provider.

== Why are digital Project Bank Accounts having their time? ==

Digitisation has transformed what was once a cumbersome and administrative-heavy process into a slick and enjoyable alternative. Project Bank Accounts can now be opened within days (or even faster!), and accessed via secure portals that enable all relevant stakeholders (including Employers, Contractors, Sub-Contractors, and Contract Administrators) to track payment certificates, invoices, and VAT reconciliations in real time.

Like challenger banks, digital PBA's address historic legacy banking challenges head-on. The process is faster, more cost-effective, and far more transparent. Centralised hubs make sure that all of the project documentation is logically housed, easily retrievable, and consistently updated.

== What actually is a Digital PBA? ==

A digital project bank account is a traditional project bank account (held at an underlying bank), but delivered through a digital interface by a FinTech or payment service provider. This update provides some clear benefits over 'traditional' bank-administered accounts, namely in terms of ease of use, speed of opening, lowering of bureaucracy and transparency to all of the relevant stakeholders.

== Five Core Benefits of Digital Project Bank Accounts ==

=== 1. Rapid Account Opening ===

Digital PBA's allow for swift onboarding. Where traditional PBA's might take weeks or months to establish, modern platforms with integrated compliance systems can achieve this in a matter of days (or even faster), without compromising on diligence or rigour.

=== 2. Transparency by Design ===

Real-time access to account activity allows all authorised stakeholders to see when and where payments are made. This visibility enhances trust, mitigates disputes, and reinforces parties' compliance with their contractual payment obligations, ensuring prompt payment and protection for the supply chain.

=== 3. Centralised Project Documentation ===

A properly executed digital PBA serves as the operational heart of a project’s financial management. Contracts, payment certificates, VAT statements, and invoices are stored in a unified environment, streamlining reconciliation and audit processes and ensuring that everyone has access to the same information.

=== 4. Improved Construction Supply Chain Confidence ===

By ensuring that all deposits with us are ring-fenced and distributed directly to the supply chain, digital PBA's improve Sub-Contractor cashflow and reduce the need for credit, whilst also protecting the Employer in the event of the Main Contractor's insolvency. This, in turn, can result in better pricing and stronger delivery performance across the board.

=== 5. Legal and Regulatory Alignment ===

A well-structured digital PBA will comply not only with construction contract requirements but also with payment services regulations and all of the relevant financial services compliance regulations as well. This alignment ensures all deposits are safeguarded, stakeholders are protected and the accounts are fit for purpose.

== What to Look for in a Digital PBA Provider ==

Not all digital PBA's are created equal. It is essential to evaluate both the legal and operational frameworks supporting the account.

=== Secure and Segregated Fund Holding ===

At dospay, all sterling deposits are held unencumbered and liquid at the Bank of England. This offers the highest possible level of security - funds are never lent, pledged, or otherwise exposed to trading risk of us, or our bankers. Providers using lender banks may introduce additional layers of risk, beyond that of the provider's own insolvency, to include the underlying financial institution's possible insolvency as well. It is essential that each party's project funds are properly protected.

=== FCA-Registered PBA's in England ===

dospay is registered with the Financial Conduct Authority specifically for carrying out payment services under the Payment Services Regulations 2017. This guarantees that the entire product meets stringent legal and compliance standards, both from an accountability standard between us and our regulator, but also from a governance perspective for our clients who are considering depositing, usually, millions or tens of millions of pounds with us.

Some other providers don't actually operate payment services, but build their products around trust models (which mean that yet another party (either a bank or FinTech) has to be responsible for the payment services element) - it pays to verify how many people are involved.

=== Support for High-Value Construction Payments ===

We're used to handling big accounts for big projects. Where individual monthly payment amounts exceed the standard limits of Faster Payments (typically £1 million), it is essential that your provider can facilitate CHAPS transfers. We support Faster Payments and CHAPS as standard, enabling rapid, same-day settlement of high-value sums so that we can support even the biggest infrastructure projects.

=== PBA's as a Legal Service ===

In our view, a PBA is a legal service, with a bank account attached to deliver it. It is not a bank account with a software wrapper, nor a bank account with a service attached. This legal-first approach means the account structure and its administration is robust, enforceable, and professionally administered. We started out as construction lawyers, so our offering meets all of these requirements.

=== Experienced and proven ===

Founded in 2012, dospay is both profitable and well-funded. We are not reliant on venture capital, investors, or speculative growth. Our clients benefit from mature systems, experienced professionals, and the benefit of our business having a proven, profitable track record.

=== Transparent and Sustainable Pricing ===

dospay’s pricing is transparent and structured around the value we are able to add to complex and long-term projects. Every single account is profitable to us, because that is how we know that we will still be around to discharge our obligations at the end of our clients' projects, not just at the beginning. We don't make our money on transaction margins or volume-based fees.

== Choosing the Right Provider for your Project: Key Considerations ==

When selecting a digital PBA provider, make sure you ask:

* Where are the funds held, and under what legal structure and at what banking institution?
* Is the provider registered with or authorised by the FCA for the provision of payment, banking or e-money?
* Can the system accommodate high-value CHAPS payments?
* Is the escrow structure a bespoke arrangement for your project, or a one-size-fits-all tech solution?
* What level of personal support is available during setup and ongoing administration?
* How is the provider funded - are they stable are or are they dependent on external investors?
* Will they welcome you to their offices for a meeting, or come to yours for one?
* Do they have a tried-and-tested [https://www.dospay.co.uk/escrow-accounts/construction-retentions-escrow system for protecting construction retentions] during and after the project bank account period (in particular, after practical completion)?

While the technology angle of project bank accounts represents an important and exciting step forward, the holy trinity of capabilities required to deliver successful project bank accounts remains at the intersection of construction, legal and financial services expertise.

== Conclusion ==

Digital Project Bank Accounts have redefined how complex projects manage their finances - making payment processes faster, more transparent, and more reliable. But while the technology is a major step forward, the underlying legal and regulatory structures remain paramount.

Choosing a digital PBA is not simply a matter of selecting the most attractive interface, or lowest initial fee. It is about making sure that the legal protections are sound, the funds are genuinely safeguarded, and the provider is both experienced and reliable at administering complex project bank accounts. At dospay, we combine legal rigour, regulatory compliance, and practical delivery to offer a digital PBA that can meet the standards of the most discerning clients in both the private and public sectors.

[[Category:Definitions]] [[Category:Education]] [[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]] [[Category:Procurement]]

“Security for Expenses” under the Party Wall etc. Act 1996

2025-07-31T10:45:49Z

Peter Hillyard: Protected "“Security for Expenses” under the Party Wall etc. Act 1996": Protecting content ([edit=author] (indefinite))

=== What is “Security for Expenses”? (Section 12 of the Act) ===

Security for expenses ('SfE') is essentially a financial safeguard. It is a sum of money set aside to cover potential costs or losses an adjoining owner might suffer due to the proposed works. Think of it like a safety deposit. The money is typically held by a third party (like the [https://www.securityforexpensesscheme.org/ UK Security for Expenses Scheme]) and can be used if the building owner fails to fulfil their obligations – for example, if they start the work but, say, go bankrupt before fixing the neighbour’s damages, the neighbour can draw on this security fund to cover repairs.

The concept recognises that construction work can sometimes go wrong or be left incomplete, potentially leaving the adjoining owner out of pocket. By obtaining security up front, the adjoining owner has peace of mind that funds will be available to fix any damage or complete any work that the building owner is supposed to do on their property[https://grahamkinnear.com/party-wall-security-for-expenses/#:~:text=removed%20and%20then%20reinstated%20following,reinstate%20the%20Adjoining%20owners%20premises ‍]. It’s a protective measure, not guaranteed to be requested in every case, but available when the risk justifies it.

Security can take various forms. The simplest is cash – the building owner deposits an agreed amount in an SfE account or with a stakeholder (often the UK Security for Expenses Scheme, because it carries no fees). Other forms include a [https://www.securityforexpensesscheme.org/article/security-for-expenses-bonds-alternatives bank guarantee or bond], where a bank promises to pay up to a certain amount if called upon or possibly an [https://www.securityforexpensesscheme.org/article/security-for-expenses-insurance-alternatives insurance policy] earmarked for the purpoe. The key is that the security must be readily accessible if needed. The Act doesn’t dictate the form, so long as both parties or the surveyors are satisfied it’s reliable.

== When and Why Can Security for Expenses be Requested? (Assessing the Need) ==

=== Adjoining Owner’s Right to Request ===

Under Section 12(1) of the Act, an adjoining owner may serve notice on the building owner requiring SfE before the work starts This is a right, not an obligation – meaning the adjoining owner decides if they feel security is necessary. In practice, adjoining owners typically request security when the planned works are substantial enough to pose a real risk of significant damage or costs.

=== Typical Scenarios for Security ===

SfE is most commonly requested in cases of high-risk work:

Deep excavations or basements

If you’re digging under the ground near your neighbour’s foundation (e.g., creating a basement), the neighbour may fear structural damage like subsidence. They might ask for a large security sum to ensure any potential underpinning or repairs can be paid for.

Major structural alterations to a party wall

For example, if you’re removing a large section of a party wall or demolishing an adjacent structure, the neighbour might worry their building will be exposed or unstable, requiring urgent remediation.

Projects by developers or unknown parties

If the building owner is a property developer or someone the neighbour doesn’t know well, the neighbour might be less confident in their personal assurance. Security provides a formal guarantee. In contrast, if it’s a small job by a long-time neighbour whom they trust, they might not bother.

History of issues

If the adjoining owner has had past bad experiences (perhaps the building owner started work once and stopped due to funds), they may be quicker to request security.

The Reasoning

Essentially, an adjoining owner asks for security when they perceive a non-trivial risk of financial loss if things don’t go as planned. For instance, if a project is large and expensive, they may worry “What if you, the building owner, run out of money mid-project? Will my property be left damaged with no recourse?” Security answers that by reserving money ahead of time.

=== Building Owner’s Right to Request (Less Common) ===

Interestingly, Section 12(2) also allows the building owner to request security from the adjoining owner in certain situations.

This could occur if the adjoining owner demands some extra work to be done for their benefit, for which they are responsible for the cost. For example, if the neighbour says, “I’d like you to thicken the party wall or include special features for me as part of your project,” and that will cost the building owner more money initially, the building owner can ask the neighbour to provide security for the neighbour’s share of those costs.

Another scenario: if the neighbour has triggered a Section 12(1) request, Section 12(2) ensures the building owner can reciprocally ask for security if needed (though in practice, this is rare). The idea is fairness – if one side is asking the other to shoulder costs on their behalf, security can go both ways.

== How is Security for Expenses Requested and Decided? ==

=== Initial Request by Notice ===

The adjoining owner must formally serve a notice on the building owner to invoke SfE (this can be included as part of their dissent response or as a separate notice). This notice should state that security is required and ideally suggest an amount or at least indicate the concern.

=== Agreeing on an Amount ===

After a security request, the first step is negotiation. The building owner and adjoining owner may try to agree on a reasonable sum between themselves. For example, they might both acknowledge that £10,000 is enough to cover worst-case damages for a given project. If an agreement is reached, they will typically document how that money will be held (say, in a UK Security for Expenses Scheme Account) and the conditions for release.

=== Surveyors’ Determination ===

If the owners cannot agree on the amount or terms of security, the matter is handed to the party wall surveyors under Section 10. In other words, it becomes part of the dispute that the surveyors resolve in the Award. The appointed surveyor(s) will then determine:

* Whether security is indeed warranted (in most cases if one side asks, surveyors tend to allow it unless it’s clearly unjustified).
* The amount of security to be provided.
* The form (cash deposit is common).
* Who will hold it (eg, the UK Security for Expenses Scheme).
* Conditions for release – typically, the money is returned to the building owner once the works are completed satisfactorily and any damage made good, minus any justified deductions for repairs.

=== Timing ===

Security must be requested before works commence. You cannot typically ask for security halfway through a project. The idea is it’s agreed (or awarded by surveyors) as a pre-condition to work starting. Often the Award will state “Work shall not commence until the building owner has provided security of £X in the following manner…”.

=== Failure to Provide Security ===

What if the surveyors award that the building owner must provide (say) £20,000 security, but the building owner doesn’t pay it? In such a case, the building owner is not allowed to start the work. If they attempted to, they’d be in breach of the Award, and the adjoining owner could get an injunction to stop the work. Additionally, Section 12(3) provides a kind of safeguard for building owners: if the adjoining owner has requested security but then they fail to comply with any reciprocal conditions (like perhaps the building owner asked for security for a counter-work), the adjoining owner’s original request ceases to have effect after one month[https://www.designingbuildings.co.uk/wiki/Security%20for%20expenses%20under%20the%20Party%20Wall%20Act#:~:text=Under%20section%20%2012,cease%20to%20have%20an%20effect designingbuildings.co.uk]. This prevents an adjoining owner from, say, demanding security but refusing to do their part and thus stalling the project indefinitely.

== What Costs Can Security for Expenses Cover? ==

Historically, surveyors tended to set security amounts to cover scenarios where the building owner might not finish a job that affects the neighbour’s property. For example, if part of the neighbour’s wall had to be taken down during construction, security would ensure funds to rebuild it if the building owner walked away. The old practice (pre-2011) as noted in the Green Book (a well-known party wall guide) was that security could only be asked for if the building owner was going to exercise rights over the adjoining owner’s property (like entering their land or doing work to their side). So if a job was entirely on the building owner’s own land (like digging just on your side, or building a wall on your land up to the line), the thinking was that the adjoining owner couldn’t seek security.

=== Expanded Scope – Kaye v Lawrence ===

The case Kaye v Lawrence changed this understanding around 2011. The court decided that SfE can be requested for any works covered by the Act, even if those works are on the building owner’s land, as long as they carry risk to the neighbour. This effectively overrode the traditional limitation. Now, what matters is whether the works might cause the neighbour to incur expense or loss, not strictly where the work is taking place.

=== Costs it Covers ===

In plain terms, security is there to cover “any loss or damage arising from the works carried out under the Act”.Essentially, if the building works could impose a cost on the adjoining owner, the security should be sufficient to cover it. It’s not meant to punish the building owner or act as a bond for good behavior; it’s purely financial protection.

This can include:

* The expense of making good damage to the neighbour’s property (e.g. repairing cracks, fixing structural issues caused by the works)
* Temporary accommodation costs if the neighbour has to move out while repairs are done
* Professional fees the neighbour might incur related to the damage (architect or engineer fees to assess and remediate issues)
* Possibly even general damages or legal fees if, say, the neighbour had to take action due to the works.
* Any other specific liabilities that can be reasonably foreseen from the works.

=== How Much is Typical? ===

The amount will vary widely with the project. Simple jobs often involve no security at all. For big projects like basement excavations in London, security amounts can be significant – commonly in the hof thousands of pounds. Surveyors will consider the worst-case damage scenario and the cost to fix it when deciding the figure. They don’t want it too low (or it’s pointless), but also not exorbitantly high such that it unnecessarily ties up the building owner’s funds.

Case Example: Imagine you are digging a basement and underpinning a party wall. Surveyors might estimate that if it went wrong, the worst case is the neighbour’s wall cracks severely and needs structural repair costing £40,000, plus the neighbour might need to stay elsewhere for a month (£10,000) and some engineer fees (£7,500). They’d likely set security around £57,500 in that scenario. If the project goes fine, you get that money back; if not, the neighbour can be compensated from it.

=== Recent Examples We've Seen ===

We've recently handled SfE deposits for as little as £1,000 and as high as several hundred thousand pounds. Some examples we've seen:

* A loft conversion in Kent: £1,000
* A basement excavation in Belgravia, London: £35,000
* A basement excavation in Hampstead, London: £50,000
* A basement excavation in Chelsea, London (2 neighbours): £300,000 (in total)
* A basement excavation (5 neighbours) in Holland Park, London: £870,000 (in total)

== How Security for Expenses is Held and Released ==

=== Stakeholder Account ===

Once an amount is determined, the building owner will hand over that money (or instrument) to a stakeholder. Often, this will be held by an entirely independent, regulated third party who has suitable experience and safeguarding arrangements for the funds - like the UK Security for Expenses Scheme who hold deposits at the Bank of England. The key is both parties trust the stakeholder to only release the money under agreed conditions.

=== During the Works ===

The security just sits untouched typically while works are ongoing. It’s not to be used for the works themselves; it’s there as an emergency fund. The building owner continues to fund and carry out their project as normal, knowing they can’t access that chunk of money until completion (which can impact their cash flow, one reason building owners sometimes resent security requests).

=== Triggering a Payout ===

If the adjoining owner suffers a loss covered by the security (say, cracks appear and the building owner doesn’t promptly fix them), the adjoining owner can approach the surveyor(s) or stakeholder to claim against the security. Usually, the Award will outline this procedure. For example, it may say that the surveyors can authorise using the security money to pay a contractor to make good damage if the building owner fails to do so within a certain time. In any case, it would be an evidence-based process: showing quotes or invoices for repair, etc., to justify dipping into the fund.

=== Release of Funds ===

If the project completes and no issues remain, the security is returned to the building owner (often with a formal confirmation from surveyors that they are satisfied the risk has passed). It could also be partially returned if only a part was used. The timing of release can vary – some awards say the security is held until the end of the making good period (often there’s a few months after completion where minor defects might still manifest). Others may specify a fixed period after work completion. The building owner will be eager to get it back as soon as possible, whereas the adjoining owner will want to ensure all is truly well.

== Impact of Security for Expenses on Building Owners and Projects ==

From a building owner’s perspective, being asked to provide security can be a significant financial burden. For example, having to lock £50,000 or more in a bank account for the duration of a project means that money isn’t available for the project itself or other uses.

In some cases, building owners may need to secure a loan or facility to provide the security. There have been instances where a project couldn’t start because the owner simply didn’t have the liquidity to provide the required security. This is a double-edged sword of the Act: it’s protective, but it can also prevent works from commencing if the owner lacks funds.

Knowing the possibility of a security request, prudent building owners (and their architects/engineers) will consider ways to mitigate risks and thus avoid or minimise security. For instance, they might present a very robust method statement to reassure the neighbour that the risk is low, hoping the neighbour won’t request security. Or they might volunteer some security amount proactively in the notice to show good faith and possibly control the amount.

In some extreme cases, the requirement of a large security deposit might make a building owner rethink the scope of their project. For example, a homeowner considering a basement dig might reconsider if told they need to park £100k aside for security. They might opt for a shallower excavation or an alternative that doesn’t trigger such a high security – thereby the Act indirectly influences the design and extent of some projects due to these cost implications.

The security is tied up typically until the very end of the project (including any defect liability or making good period). That might be many months, or even years if a project is slow. Building owners need to plan for that money to be out of reach. This can affect cash flow projections, and in development scenarios, might require involving investors or financial instruments (like a bank guarantee, which itself can cost a fee).

Some building owners look to [https://www.securityforexpensesscheme.org/article/security-for-expenses-insurance-alternatives insurance as an alternative] – for example, building a robust insurance coverage for the project (including cover for adjacent property damage) and trying to convince the neighbour that this removes the need for a cash security. Sometimes neighbours are comforted by insurance, but others still prefer a pot of money they know is earmarked for them if needed. Insurance claims can be contested by insurers, whereas a security deposit is straightforward to use. Still, showing proof of insurance can sometimes be part of negotiating the security amount down.

Requesting security can sometimes strain neighbour relations. A building owner might take offence (“Don’t you trust me?”) or feel the neighbour is being overly cautious or difficult. Conversely, a neighbour might feel it’s their right and they’re only being prudent. Good communication is key – often a neighbour will explain that they do trust the owner, but their advisors recommended security just in case. It helps if both see it as a normal part of the process, not a personal affront. Surveyors can mediate this conversation, explaining it’s standard for certain projects (like basements in London frequently have security and it’s not a judgment on the character of the builder, just a risk management step).

== Rights and Duties of Each Party Regarding Security ==

=== Adjoining Owner’s Position ===

The adjoining owner has the right to request security but not an obligation to do so. If they feel comfortable with the building owner’s solvency and the scope of works, they might waive security to maintain goodwill. If they do request it, they should do so in writing and ideally specify concerns or a ballpark figure. They should also be prepared to demonstrate why it’s needed if challenged. Once security is in place, the adjoining owner has a duty not to unreasonably withhold its release when appropriate – i.e., they can’t unfairly claim against it for unrelated issues or try to keep it without cause.

=== Building Owner’s Position ===

The building owner, on receiving a security request, should not simply dismiss it. They should either negotiate or let the surveyor address it. They do have the right to contest the necessity or amount (through the surveyor process), especially if they believe the request is excessive. For instance, if a neighbour asked for £50k for a very minor work, the building owner can argue it’s unwarranted.

If surveyors agree a lower amount or none is fine, that will prevail. However, if the Award mandates security, the building owner is legally obliged to put it up before starting the work. Failing to do so basically halts the project (legally). If the building owner is concerned the neighbour’s surveyor is over-inflating the requirement just to pad fees, they can request a breakdown or involve the third surveyor. They also can choose the form of security (cash vs bond) as long as it meets the Award’s conditions.

=== Surveyors’ Role ===

Surveyors must tread a fine line – they have to ensure the adjoining owner is reasonably protected, but also that the amount of security is proportionate to the risk so as not to unduly burden the building owner[https://www.designingbuildings.co.uk/wiki/Security%20for%20expenses%20under%20the%20Party%20Wall%20Act#:~:text=The%20costs%20%20associated%20with,the%20works%20being%20carried%20out ‍].

They will typically rely on their experience and perhaps consult engineers on likely worst-case damages. Surveyors also oversee the eventual release or use of the security funds. Importantly, surveyors should recognise if an adjoining owner’s request is being made in bad faith (e.g., just to stall the project or punish the building owner) – they shouldn’t award security in that case beyond what’s justified. The Act expects surveyors to act impartially, so they won’t approve a grossly unfair security demand.

=== Section 12(3) Safeguard ===

If the building owner requested security from the adjoining owner (a rare scenario, e.g., the neighbour wants additional works done), and the neighbour doesn’t provide it within one month of the determination, then the neighbour’s original Section 12(1) request becomes void.

This is a protective clause to ensure fairness. In simpler terms: both sides must comply with security requirements or neither side’s requirement stands. This prevents an adjoining owner from saying “I want £10k from you” while refusing to pay something they owe in return – if they don’t comply on their side, their security request on the building owner is canceled.

== Misuse and Caution in Security Requests ==

Not every project warrants a security request. Experienced practitioners note that SfE is relatively rare – one surveyor recounted that out of over 1,000 party wall matters, they dealt with security in only about half a dozen.

Some surveyors in London, dealing with frequent basement jobs, see it more often (one mentioned about half of their cases), but that’s in very high-risk works. The point is, an adjoining owner should use this right judiciously. If they demand security for a trivial project, it may sour relations and could be struck down as unreasonable.

There’s concern about questionable motives – a minority of surveyors might encourage security requests just to increase their workload (since handling the security arrangement can add to fees). Building owners should be aware of this and, if a very large security sum is proposed, ask for justification. Adjoining owners should also be wary if a surveyor they appoint pushes for security without clear reason – it’s fair to ask, “Do we really need this, and how did you calculate that figure?” Transparency can filter out any frivolous or self-serving suggestions.

Sometimes, simply talking it out can avoid a security standoff. A building owner might show the neighbour around the site, explaining how they’ll prevent damage, share structural reports, offer references or evidence of reliability, or even agree to a smaller security amount as a gesture of good faith. Conversely, an adjoining owner might be persuaded by assurances or modifications to the plan that reduce risk, thus retracting their request for a huge deposit.

If either party is unsure about security, they might consult a solicitor experienced in party wall matters. Although surveyors handle it, a solicitor can advise, for example, whether the amount is challengeable or how an injunction might play out if things go awry. However, engaging lawyers can escalate costs, so often it’s best to let the party wall surveyors reach an accord.

Adjoining owners should note that security is not a windfall or penalty to the building owner – it’s not “your money” to keep unless genuinely needed to cover loss. Ethically and legally, if no damage occurs, that money returns to the building owner. Any temptation to try to use it unjustly can be checked by the surveyors or court. So it’s truly for protection, not profit or inconvenience.

== Best Practices for Handling Security for Expenses ==

=== For Building Owners ===

At the outset, assess if your project might trigger a security request. If yes, budget for it. Perhaps keep a line of credit or funds available.

Provide neighbours with as much information as possible to reassure them (plans, methodology, insurance certificates). A well-informed neighbour may feel safe enough not to ask for security.

If security is requested, try to engage constructively. Ask what specifically worries them. Sometimes adjusting your approach (thicker hoardings, vibration monitoring, etc.) can mitigate their concern and lead them to drop or reduce the security demand.

Consider alternatives: would the neighbour accept a bond or guarantee instead of cash? Sometimes that’s easier for a building owner to obtain.

Once an amount is agreed or awarded, comply promptly. It shows goodwill and keeps the project on schedule.

=== For Adjoining Owners ===

Don’t hesitate to request security if you truly feel the risk warrants it – that’s what the law provides for. Document your concerns (e.g., “I’m worried your excavation could cause X damage, which I estimate would cost £Y”).

Be open about your needs: maybe you’re less concerned about cosmetic cracks (which are easy to fix) but very concerned about structural issues. This can focus the discussion.

Listen to proposals from the building owner. If they show they have insurance or have hired a reputable contractor with a good track record, factor that in.

If you do get security, remember it’s there for a worst-case scenario. With any luck, it won’t be needed. Continue to cooperate and don’t view the security as a substitute for maintaining dialogue. Keep the building owner informed if you notice any issues during construction (it’s better to address problems early than just wait to claim on the security later).

=== For Surveyors ===

Examine the project specifics neutrally. Use objective criteria (nature of soil, depth of excavation, condition of adjoining property, etc.) to judge the risk.

Justify the recommended amount clearly in the Award or discussions. Perhaps break it down (“£X for potential damage to wall, £Y for possible internal repairs, £Z contingency for accommodations”) so both owners see the rationale.

Ensure the terms of holding and releasing the security are explicit in the Award to avoid confusion or disputes later.

Remind both parties that security is not a commentary on trustworthiness; it’s akin to insurance – you hope not to need it, but it’s there if required.

If acting as the agreed surveyor, be especially fair – you are the sole determinant, so you might even suggest taking a cautious approach like setting a bit more with the note that it will be promptly returned if unused, just to satisfy the neighbour.

== Conclusion: The Role of Security for Expenses in Party Wall Matters ==

SfE is a powerful tool under the Party Wall etc. Act 1996 that adds a layer of financial security to an adjoining owner. It exemplifies the Act’s spirit of balancing interests – enabling the building owner’s project while ensuring the neighbour isn’t left vulnerable to costs.

Not every project will involve security, but when it does, it often means the works are substantial. For building owners, understanding this mechanism is crucial for project planning; for adjoining owners, it’s a form of reassurance when faced with potentially disruptive works.

Both should view it not as an adversarial weapon but as a form of mutual protection – it ultimately benefits both, because if it facilitates trust, the project can proceed more smoothly. With clear communication and fair assessment, SfE can be handled in a way that safeguards property without unnecessarily hindering development.

In the end, like much of the Party Wall Act, it’s about striking that fair balance so neighbours can remain neighbours, not adversaries, once the dust of construction settles.

[[Category:Definitions]] [[Category:Education]] [[Category:Construction_management]] [[Category:Cost_/_business_planning]]

“Security for Expenses” under the Party Wall etc. Act 1996

2025-07-31T10:45:17Z

Peter Hillyard: Created page with "=== What is “Security for Expenses”? (Section 12 of the Act) === Security for expenses ('SfE') is essentially a financial safeguard. It is a sum of money set aside to cover ..."

Understanding the party wall act

2025-07-31T10:43:42Z

Peter Hillyard: Created page with "== Overview of the Act’s Framework and Scope == The Party Wall etc. Act 1996 provides a legal framework to facilitate certain building works that affect shared walls or nearby..."

== Overview of the Act’s Framework and Scope ==

The Party Wall etc. Act 1996 provides a legal framework to facilitate certain building works that affect shared walls or nearby structures while preventing and resolving disputes with adjoining owners. In simple terms, it balances a building owner’s right to alter their property against the neighbouring owner’s right to avoid damage or undue inconvenience.

The Act applies to specific types of work:

* Building a new wall on or at the boundary between properties (Section 1)
* Altering, extending, or repairing an existing party wall or party structure (Section 2), or even attaching new building work to it
* Excavating near a neighbouring building (Section 6), such as digging foundations or a basement within certain distances and depths relative to the neighbour’s building
* Geographical Coverage: The Act is in force across England and Wales (it does not apply in Scotland or Northern Ireland). It covers all kinds of properties – residential, commercial, institutional – as long as the work falls under the categories in the Act. Both terraced/semi-detached houses and adjacent standalone buildings can be subject to the Act if the planned work is within the Act’s scope.

== Types of Work Requiring Notice (Sections 1, 2, and 6) ==

Under the Act, notifiable works are chiefly those likely to affect the structural or boundary interests of a neighbour. The key sections of the Act define these as follows:

* Section 1: New Walls at the Boundary – Covers building a new wall at or astride the line of junction (boundary) between two properties. For example, if you plan to construct an extension and build a new wall along the shared boundary line (where no wall existed before), or attach a new wall to the boundary, this section applies. You must notify the neighbour even if the new wall will be wholly on your side, because it could affect the boundary and the neighbour’s ability to use that wall in future.
* Section 2: Works to Party Walls or Structures – This is the broadest category. It allows a building owner to carry out works on an existing party wall, party floor/ceiling, or shared boundary structure. Typical works include: cutting into a party wall to install beams or flashings, raising the height of a party wall, thickening it, demolishing and rebuilding a party wall, or exposing it (e.g., removing a chimney breast from a party wall). Even minor works like drilling to insert fixings, or damp-proof coursing in a shared wall, can fall under Section 2. Essentially, if it’s an alteration that affects a wall or structure you share (or a garden wall built astride the boundary), it is likely covered.
* Section 6: Adjacent Excavations and Foundations – Applies when you plan to dig near your neighbour’s building to a depth that might undermine its foundations. There are two distance criteria under this section:
** Within 3 metres of their building, if digging below the bottom of their foundations.
** Within 6 metres, if digging below a line drawn down at 45° from the bottom of their foundations (this typically captures deeper excavations a bit further away).
** Common examples are excavating for new foundations, a basement, or a swimming pool. If your project involves substantial digging, Section 6 likely requires you to serve notice, even if the digging is entirely on your land, because of the potential effect on the neighbour’s structure.

Note: If your work doesn’t fall into Section 1, 2, or 6, the Act may not apply. For instance, purely internal works within your own building (that don’t affect a party wall’s structure) or very superficial changes (like putting up shelves on your side of a party wall) typically are not notifiable. However, when in doubt, it’s wise to seek advice – better to err on the side of caution and serve notice if you think the Act might apply.

== Serving a Party Wall Notice: Procedure and Requirements ==

A formal Party Wall Notice must be given to all affected adjoining owners before starting any work covered by the Act.

The following minimum periods give your neighbour time to consider the proposal. (If the neighbour is agreeable, they can consent to an earlier start in writing, but they are not obliged to. Notices are only valid for 12 months, so you shouldn’t serve them too far in advance of when you intend to begin work.

* At least 2 months’ notice before work commences for Section 2 works (existing party walls).
* At least 1 month’s notice for Section 1 (new boundary walls) or Section 6 (excavations).

You must serve notice on “all Adjoining Owners” – this includes freehold owners and any leasehold owners with leases over 1 year of the neighbouring property. For example, if your neighbour’s house is rented out, you may need to serve the notice to both the landlord and the long-term tenant if the tenant has a qualifying lease. In most typical cases, serving the freehold owner suffices (e.g., the neighbour who lives next door and owns their home).

A party wall notice should be in writing and include key information:

* Your name and address (and the address of the building where work is planned, if different).
* Full details of the proposed work – what you intend to do, and how (for example, “to excavate for a new two-storey rear extension 3m from the adjoining owner’s house, to a depth of 1m below the existing foundation level”). Reference the relevant section of the Act if known.
* Start date – when you plan to commence the work (must be after the notice period). It’s common to phrase this as “on or after [date]” to give some flexibility.
* Invitation to consent or appoint a surveyor – the Act doesn’t prescribe exact wording, but it’s standard to ask the neighbour to either consent or dissent (object) within 14 days, and inform that if they do not respond, a dispute is deemed to have arisen under the Act.

Notices can be delivered by hand or by mail. Since 2016, they may be served via email as well, if the adjoining owner has expressly agreed to receive notices electronically. It’s prudent to keep proof of service (like a postal receipt or a written acknowledgement from the neighbour). If the neighbour is absent or unreachable, the Act allows alternatives (posting it to a last known address, etc., and even fixing it to a conspicuous part of the property if needed).

If your work affects multiple neighbours (e.g. you’re in a terrace and excavating near two adjacent homes), you must serve each of them separately. Each adjoining owner can make their own decision on consent or dissent.

== Neighbour’s Response to a Notice: Consent, Dissent, or Counter-Notice ==

Once the adjoining owner receives your notice, they have a few options in how to respond:

=== Consent to the Proposed Works: ===

If the adjoining owner is happy with what you’ve described, they can consent in writing. They might simply sign and return a consent note. Consent means you can proceed with the work as described, but it’s wise (and common) even in this case to agree on a Schedule of Condition of the neighbour’s property. This is a detailed record (often with photographs) of the neighbouring areas before work starts, so that any claims of damage can be easily assessed later. Even though a consent means no surveyors under the Act, neighbours often amicably agree to document conditions to protect both sides.

=== Dissent (Disagree) ===

If the adjoining owner is not satisfied or just wants the protection of the Act’s dispute process, they can dissent. Dissent doesn’t necessarily mean they oppose the work entirely; it often means “I want certain conditions” or simply that they prefer a formal Party Wall Award to be in place. They may respond by nominating a surveyor to act for them, or just by writing back “I dissent; I wish a surveyor to be appointed.” Once dissent is given (or if no response is received within 14 days of serving the notice, the law treats that as a dissent by default), then a “dispute” is deemed to have arisen under the Act. This kicks off the dispute resolution procedure (explained below under “Party Wall Award”).

=== Counter-Notice by Adjoining Owner ===

In some situations, the adjoining owner might serve a counter-notice within one month of the original notice. A counter-notice is the neighbour saying, “I consent to your work provided you also do the following additional work…” which usually is something beneficial to the neighbour. For example, if you notified an intention to build a new wall on the boundary (Section 1), the neighbour could counter-notice requiring you to build the wall as a party wall (astride the boundary) so that they have rights over it too – in which case they might contribute to the cost. Or if you propose to expose their wall (by demolishing a structure of yours attached to it), they might counter-notice for you to weatherproof or seal the exposed side. If a counter-notice is served, you as the building owner have to respond (agree or disagree) within 14 days. Any disagreements over a counter-notice also become part of the “dispute” to be handled by surveyors.

=== No Response ===

If the adjoining owner does not reply at all within 14 days, this is treated as a dissent by silence (a dispute arising). The building owner then must proceed to appoint a surveyor on the neighbour’s behalf so that the process can move forward. In practice, this scenario is common – sometimes neighbours ignore notices. The Act anticipates this by allowing the building owner to still get an Award done: you would appoint your own surveyor, inform the neighbour in writing again that they failed to respond and you are now appointing a surveyor for them, and then two surveyors will produce an Award. (The neighbour is not allowed to just ignore the Act and thereby stall your project indefinitely.)

== The Party Wall Award: Dispute Resolution through Surveyors (Section 10) ==

When a dispute arises (through dissent or no response), the next step is for each side to appoint a surveyor. The building owner may appoint one, and the adjoining owner either appoints their own or, if they agree, both parties can share one “Agreed Surveyor”. Using one agreed surveyor can save time and cost, as that single surveyor acts impartially for both. If separate surveyors are appointed, those two surveyors will then select a Third Surveyor at the outset (kind of a referee). The third surveyor steps in only if the two cannot agree on some aspect, or if either party invokes the third surveyor to make an Award (this is rare; normally the first two surveyors reach a consensus).

Importantly, party wall surveyors do not act as advocates for the appointing owners (despite being chosen by one side). Under the Act, the surveyors must act impartially and consider the rights of both parties. Their job is to settle the dispute by producing a Party Wall Award (also simply called “the award”). They have broad powers to decide how the work should proceed and what protections or compensations are appropriate for the adjoining owner. Typically, the surveyors will review the planned drawings, possibly inspect the properties, and then agree on conditions.

=== Contents of a Party Wall Award ===

A Party Wall Award is a formal document, akin to a binding agreement, which usually includes:

* Details of the works authorised (with any modifications or additional precautions). It may specify methods of construction to minimise risk.
* Working times or restrictions (for example, no work before 8am or after 6pm, to reduce nuisance).
* Access provisions: confirming the building owner’s right of access to the neighbour’s land if needed for the works (under Section 8) and how that should be arranged.
* Protective measures: such as requiring the building owner to implement certain safeguards (e.g., underpinning, shoring, vibration monitoring, dust protection for the neighbour’s rooms).
* Schedule of Condition: often appended, documenting the pre-work condition of the adjoining property (so any new damage can be assessed against this record).
* Making good damage: an explicit clause that the building owner must repair any damage caused by the works, or pay for repairs. The Act (Section 7(2)) requires this, and Awards typically spell out that any cracks or defects caused must be put right to the neighbour’s satisfaction or compensated in money.
* Costs and fees: which party pays what. Generally, the building owner who initiated the project pays the reasonable surveyors’ fees and the cost of any damage repair[https://www.gov.uk/government/publications/preventing-and-resolving-disputes-in-relation-to-party-walls/the-party-wall-etc-act-1996-explanatory-booklet#:~:text=The%20general%20principle%20in%20the,are%20solely%20for%20his%20benefit ‍]. If the neighbour has requested additional work for their own benefit (under a counter-notice), they might have to share costs for that portion (per Section 11).
* Security for Expenses ('SfE'): if the adjoining owner requested a security deposit, the Award will note the sum and arrangements. These deposits accounts can be managed at the [https://www.securityforexpensesscheme.org/ UK Security for Expenses Scheme]

Once the Award is agreed and signed by the surveyor(s), it is served on both owners. It is binding and both parties must comply. The building owner can then proceed with the work, but only in accordance with the terms of the Award. The adjoining owner must allow the works to be carried out as awarded (for example, granting access if required by the Award). Surveyors can include a provision for them to have access during the works to inspect progress and ensure compliance.

Typically, the building owner pays all surveyors’ fees (both theirs and the adjoining owner’s surveyor) as the works are for their benefit. The Act’s principle is that the building owner should bear the cost of facilitating the work. The only time an adjoining owner might pay is if they have requested extra works for their own advantage or if negligence is involved on their part. Surveyors decide fee allocation in the Award. There is no fixed scale of fees; they must be “reasonable” and can vary, but unreasonable fees can be challenged if needed.

If either party is unhappy with the Award (believing perhaps that the surveyors acted beyond their powers or made an error), they have a right to appeal to the county court within 14 days of being served with the Award. If no appeal is lodged in that time, the Award becomes conclusive. Appeals are not common – they can be costly and courts tend to uphold surveyors’ decisions unless there’s a clear mistake. As a building owner, you should only appeal with solid grounds, and be aware a failed appeal could result in you paying both sides’ legal costs.

== Rights and Responsibilities of the Building Owner vs Adjoining Owner ==

=== The Building Owner ===

Under the Act, as a building owner you gain legal rights to do work that otherwise could be blocked. For example, you have the right to enter the adjoining land (your neighbour’s property) if necessary to carry out the permitted works or to inspect regarding the work[https://www.gov.uk/government/publications/preventing-and-resolving-disputes-in-relation-to-party-walls/the-party-wall-etc-act-1996-explanatory-booklet#:~:text=20,to%20neighbouring%20property ‍]. This might involve erecting scaffolding on the neighbour’s side or digging on their side of the boundary if needed for your foundations. The Act requires you to give 14 days’ notice before exercising this right of entry (often this is built into the Party Wall Notice or Award). The neighbour cannot refuse reasonable access – it’s actually an offence to obstruct someone with a legal right of entry under the Act. Another right is to do necessary adjacent excavation or underpinning on your neighbour’s side if it’s needed to safeguard both buildings (with proper notice and an Award in place).

You must, however,carry out the works in accordance with the Act and any Award. This includes doing the job with “due care and caution” to avoid unnecessary damage. By law, you must make good (repair) any damage to the adjoining premises caused by your works, or compensate the neighbour for it. You also have to follow any time restrictions or methods imposed (e.g., if the Award says hand-digging near the neighbour’s wall, you can’t just use a mechanical excavator). Moreover, you are responsible for the neighbour’s reasonable costs that arise due to the works – for instance, if the neighbour had to temporarily move out during particularly disruptive work, you might be liable for their alternative accommodation costs (the Act allows such provisions in awards). Essentially, you get to do your work, but you accept the duty to protect your neighbour’s property and comfort as much as possible.

=== The Adjoining Owner ===

The neighbour has the right to be notified in advance and to have a say through either consenting or dissenting. If a dispute arises, they have the right to appoint a surveyor to represent their interests and help formulate the Award. They also can insist on certain safeguards: for example, they can request SfE (a deposit) if worried about your ability to fund potential damage repairs (see Article 4), and can request their own contractor be allowed to do specific protective works if reasonable. They have a right to not have their property undermined or their daily life subjected to undue inconvenience – the Act actually says you must not cause “unnecessary inconvenience” to the adjoining occupier (Section 7(1)). They also have the right to legal recourse if you don’t comply – if you start notifiable work without notice or ignore the Award’s terms, the adjoining owner can seek a court injunction to halt your works.

While the Act favours protecting the neighbour, adjoining owners do have some duties. They must permit access for the works to be done if the Act entitles the building owner to it. They need to cooperate in letting surveyors do inspections and shouldn’t unreasonably interfere. If they agreed in a counter-notice to pay part of the work (say for a thicker party wall they requested), they must follow through on that payment as determined. And importantly, if an Award is in place, they should abide by it just like the building owner – for instance, allowing workmen on the agreed dates, clearing personal items that might be in the way, etc., as long as those requirements are in the Award or notice.

== Consequences of Not Following the Act ==

Starting relevant work without serving the required notice is a breach of the Act. The immediate risk is that the adjoining owner can seek a court injunction to stop the works until you comply with the Act. Courts typically grant such injunctions quickly to enforce the Act, which can delay your project and add legal costs. Additionally, as confirmed in a recent Court of Appeal case Power & Kyson v. Shah [2023], if you don’t serve notice, you actually lose the benefit of the Act’s dispute process altogether. In that case, a building owner proceeded with notifiable works without notice; surveyors tried to step in and make an Award, but the court held the Act could not be invoked unilaterally by the neighbour after the fact. The result was the building owner faced a normal lawsuit for nuisance/trespass – a far costlier and riskier scenario, with no Party Wall Award protection. Bottom line: as a building owner, it’s in your interest to use the Act properly; skipping notice doesn’t avoid hassle, it increases it.

Should the adjoining side refuse to cooperate entirely (for example, refuse access when the Act allows it, or ignore the surveyor’s appointment), the building owner has legal remedies. The Act allows a second surveyor to be appointed on the neighbour’s behalf to ensure the Award can be made. And if a neighbour physically prevents entry unlawfully, they could face legal action (even criminal prosecution for obstruction, in extreme cases.

If either party breaches the terms of an Award, it is enforceable in court. For instance, if the Award says the building owner must fix cracks caused, and they fail to, the neighbour can sue for damages or get an injunction for compliance. Conversely, if a neighbour blocks works allowed by an Award, the building owner can seek an injunction to enforce their rights under the Award. In practice, such situations are rare because once an Award is in place, both sides usually adhere to it.

If a dispute somehow isn’t resolved (say surveyors cannot agree and even the third surveyor process falters, or there’s a fundamental question of interpretation), parties might end up in court. The court can appoint a surveyor or make its own determination in some circumstances, but again this is exceptional. Appeals on Awards must be within 14 days; missing that window generally locks in the Award.

The Act also has a couple of criminal offence provisions – notably for denying legal entry to those who are entitled (as mentioned). However, typical Party Wall Act issues (like not serving notice) are not criminal, they’re civil matters. The Act relies on cooperation and civil enforcement, not police, except in the specific case of obstructing entry.

== Key Takeaways for Building Owners - A Summary ==

# Check if your project is covered by the Act – common ones are loft conversions, extensions, basements, removal of shared chimneys, etc. If yes, serve a proper notice to your neighbour well before you start.
# Talk to your neighbours – The legal notice is important, but a friendly chat or letter explaining your plans can smooth the way. The Act’s process works best alongside good communication.
# Be prepared to appoint a surveyor – If your neighbour isn’t comfortable consenting, you’ll need to hire a party wall surveyor. Budget for this in your project (fees can be a few hundred to over a thousand pounds, depending on complexity). Remember, you usually pay for the neighbour’s surveyor too.
# Follow the Award – Once you have a Party Wall Award, treat it like a set of rules for your build. Share it with your architect/builders so everyone knows the limits (times of work, protection measures, etc.). If something changes in your plan, you may need to get the Award amended or a new notice – don’t just deviate without consulting your surveyor.
# Don’t ignore the Act – It’s tempting to avoid “hassle” and hope a neighbour won’t notice your works, but this can backfire badly. The law is there to protect both of you. Using it legitimately will give you a smoother project with less risk of expensive disputes. As one legal commentary notes, the Act’s procedures keep most issues out of court precisely because they are practical and fair to both sides.

[[Category:Definitions]] [[Category:Education]] [[Category:Planning_permission]] [[Category:Client_procedures]] [[Category:Cost_/_business_planning]]

Digital project bank accounts

2025-07-31T10:37:46Z

Peter Hillyard: Created page with "= Why choose a digital Project Bank Account? = Project Bank Accounts (PBA's) have long been championed as a mechanism to guarantee timely and transparent payments within complex..."

FF&E Procurement

2025-07-31T10:35:26Z

Peter Hillyard: Created page with "== What is FF&E Procurement and Why Does It Matter? == In the world of interior design, FF&E procurement - short for Furniture, Fixtures and Equipment - is both a logist..."

== What is FF&E Procurement and Why Does It Matter? ==

In the world of interior design, FF&E procurement - short for Furniture, Fixtures and Equipment - is both a logistical challenge and a financial opportunity. While much attention is placed on selecting and specifying beautiful items, the process does not end there. Designers must also manage the purchase, delivery, installation, assembly, styling and waste removal for what can easily total hundreds or even thousands of pieces.

This multifaceted process is referred to as "FF&E procurement". Beyond aesthetic considerations, it demands rigorous coordination with suppliers, manufacturers and logistics teams, and entails significant exposure to both financial and operational risk. As such, understanding the legal framework within which these items are purchased is crucial - particularly whether a designer is acting as an agent or as a principal.

== What Is the Difference Between Purchasing FF&E as Agent and as Principal? ==

The distinction lies in who holds the contractual relationship with the supplier and who bears responsibility to the client. When a designer acts as a principal, they themselves buy and then resell the FF&E to the client. When acting as an agent, the designer facilitates the transaction on behalf of the client, but the client is the purchaser.

Each approach carries distinct legal, financial and operational consequences, particularly in terms of liability, ownership of discounts, and the handling of client funds.

== Purchasing FF&E as Principal: Commercial Opportunity or Compliance Risk? ==

When an interior designer purchases FF&E as a principal, they are effectively operating as a reseller. The designer buys items, often at a trade discount, and resells them to the client at a marked-up price. This margin represents the designer's profit.

Because the designer is the legal purchaser, they own the goods until resold to the client. Any warranties or liabilities rest with them, and the contractual relationship with suppliers is theirs alone. In this arrangement:

* Discounts: All trade discounts are retained by the designer, who sets the resale price independently.
* Client Money: Funds paid by the client become the designer's money upon receipt; there is no obligation to hold it separately.
* Interest: Any interest earned on client advances belongs to the designer.
* Liability: The designer assumes all responsibility for defects or damage. If a product fails, the client’s recourse is against the designer.
* Breakages: Damage or loss in transit is also the designer’s responsibility.

While this model allows greater commercial upside and flexibility, it also carries material risk. Designers must be willing to absorb the costs of any disputes, replacements or delays. This approach is often best suited to low-risk, high-margin items where financial exposure is minimal.

== Purchasing FF&E as Agent: A Protective but Constrained Role ==

In contrast, when acting as an agent, the designer facilitates the purchase on behalf of the client. Here, the supplier sells directly to the client; the designer’s role is to identify, order, and manage the logistics. The designer earns a procurement fee, usually calculated as a percentage of the trade price, but does not profit from mark-up.

This model limits the designer’s liability but also curtails their ability to profit from trade discounts. Notably:

* Discounts: All trade discounts belong to the client, who is the purchaser.
* Client Money: Funds must be held in a separate client account and used solely for the client’s purchases.
* Interest: Any interest accrued on these funds is owed to the client.
* Liability: The supplier or manufacturer is liable for defects; the designer may assist with resolution, but bears no direct contractual responsibility.
* Breakages: Transit risks sit with the supplier or shipper.

Although this structure offers greater legal protection, it introduces complexity in managing client funds. Designers must establish and maintain separate client accounts, often requiring compliance with stringent financial regulations. For many, this is an administrative burden they are neither prepared nor qualified to manage in-house.

== Trade Discounts: Who Owns the Benefit? ==

Perhaps the most contentious issue in FF&E procurement is the treatment of trade discounts. Designers often enjoy substantial discounts from suppliers—earned through volume, industry status or long-standing relationships. Whether these are passed to the client or retained as profit depends on whether the designer is acting as agent or principal.

As principal, the designer may keep the discount and resell at market rate. As agent, however, the entire benefit of the discount belongs to the client; charging a procurement fee on the undiscounted price would be improper and may constitute a breach of the Bribery Act 2010 as representing secret commissions.

Failing to understand or disclose this distinction can expose designers to reputational and legal risk. Clients (particularly those who are legally advised) will expect transparency and correct treatment of discounts, and may seek restitution if these principles are breached.

== Managing Client Funds: Why Compliance Is Crucial ==

One of the most serious obligations in agency procurement is the treatment of client money. Funds must be held in designated client accounts, not commingled with business revenue. This is not simply good practice - it is a legal necessity under most professional and financial regulations.

Unfortunately, many designers are unaware of these obligations, or underestimate the complexity of compliance. Managing multiple client accounts, calculating procurement fees, and reconciling transactions is a specialised function.

To address this, solutions such as [https://www.dospay.co.uk/third-party-managed-accounts/ffe-procurement-accounts dospay’s FF&E Procurement Accounts] offer a compliant and transparent way to manage client money. These third-party managed accounts provide clear segregation of funds, audit trails, and interest calculations—allowing designers to focus on creative work while ensuring regulatory compliance.

== Which Model Should Interior Designers Choose? ==

There is no one-size-fits-all answer. Designers undertaking high-margin, low-risk work may benefit from operating as principal; the profit potential is higher, and the process more streamlined. However, the risks (particularly around defects, disputes, and financial transparency) can be significant.

Designers working on complex or bespoke projects, or serving clients with high legal or fiduciary standards, may find the agent model safer and more appropriate. Though it limits margin potential, it aligns legal responsibility with the actual supplier and offers clearer client protections.

In either case, what matters most is clarity, transparency, and compliance. Designers must be honest with clients about the model they are using, document the arrangement properly, and ensure that any financial arrangements - particularly around trade discounts and client money—are handled in accordance with best practice.

== Conclusion: FF&E Procurement is More Than Just Logistics ==

FF&E procurement is a vital, valuable part of an interior designer’s role. But it is also one fraught with legal, financial and reputational risk if mishandled. Understanding whether you are acting as agent or principal is essential - not just for accurate pricing, but for regulatory compliance and client trust.

Designers who treat procurement seriously, operate transparently, and partner with credible financial platforms will not only protect themselves—they will also enhance their professional reputation.

[[Category:Definitions]] [[Category:Education]] [[Category:Design]] [[Category:Procurement]] [[Category:Roles_/_services]]

Construction escrow

2025-07-31T10:33:10Z

Peter Hillyard: Protected "Construction escrow": Protecting content ([edit=author] (indefinite))

= Construction Escrow: A Contractor's Guide =

== What is Construction Escrow and How Does It Work? ==

Construction escrow is a financial arrangement designed to protect all parties involved in a construction project. At its core, it involves holding funds in a neutral, third-party bank account ("in escrow"), as security for the Employer's payment obligations. This provides assurance that the Contractor will be paid on time and in full, while the Employer retains oversight over payment amounts in the usual way.

In the UK, construction escrow is increasingly seen as a sophisticated alternative to traditional security measures like performance bonds and guarantees. In addition to mitigating the risks of non-payment, they are fantastic at avoiding disputes over the second release of retention as well - facilitating smoother project execution and fostering trust between stakeholders.

== Why Should Contractors Ask for Construction Escrow? ==

It is rare for the Employer to propose an escrow - after all, they will have to tie up funds and not have access to them for the duration of the project. That said, as margins remain so tight and the spectre of non-payment looms large, Contractors are becoming increasingly effective at asking for them. The reasons are many:

=== Certainty of Payment ===

Perhaps the most compelling reason for a Contractor to insist on construction escrow is the security of knowing that payment has been ring-fenced. Unlike the bare promises to pay contained within the project, escrow funds are already in place and ready to be paid over. This removes the uncertainty about whether or not payment will be made on the final date for payment.

This is particularly critical for Contractors working with new or untested Employers, or who are being asked to contract with overseas entities or trusts - which are particularly prevalent in the super-prime residential space as wealthy overseas buyers avail themselves of tax-efficient and privacy-shielding corporate holding structures. Escrow introduces a level of financial transparency and mutual commitment from the outset, which significantly reduces risk to the Contractor.

=== Simpler and More Flexible Than a Bond ===

Performance bonds, while long-established, are often expensive and administratively cumbersome. They also depend on strict criteria being met before any claim can be made, and insurers frequently resist payouts. They are expensive, difficult to get, and often bond issuers have reservations about the number that can be 'live' at any one time.

By contrast, construction escrow offers a simple, agile framework, with no limits and much more certainty. Payouts from the escrow are linked to payment certificates, avoiding the complexities of bond enforcement or the opportunity for the escrow agent to 'wiggle out of paying'. Instead, if a Contractor has not been paid by the final date for payment, they can simply present their payment certificate and VAT invoice to the escrow agent to receive funds from the escrow.

Establishing an escrow is typically faster, easier to manage and less costly than securing a bond as well.

=== Secures Final Retention Release ===

Retention, particularly the second half released after the end of the rectification period, is often a source of tension. Employers may delay or dispute final payments, leaving contractors exposed, while in some cultures the second half of the retention is seen as the 'starting point' for the amount that the Employer will be seeking as a discount from the final account.

With an escrow arrangement, retention sums can be securely held and released automatically against the certificate of making good or final certificate. This ensures that once the relevant conditions are met, funds are promptly disbursed to the Contractor without friction, reducing the potential for end-of-project disputes and ensuring that the retention is neither delayed nor held to ransom.

== How much should be placed in escrow? ==

While Contractors will often start with asking for the whole contract sum to be placed in escrow, Employers will generally resist tying up that much money.

Instead, the agreed 'compromise' position is usually tied to the actual credit terms being extended and the credit risk the Contractor is taking:

* The Contractor has to do one month of work before he can submit an application (1 month)
* The interim valuation process then generally takes a month, with Employers often negotiating 30-day terms on their payments (1 month)
* In the event that the Contractor does not get paid on the final date for payment, they will usually wait a week or so before doing anything 'contractual' (like issuing the first notice of suspension), and must then wait at least a further week before suspending, and may also have to give a beneficiary under a collateral warranty not less than 1 month's notice (1-1.5 months)

In total, therefore, the Contractor is exposed to 3-3.5 months' worth of credit risk, plus the value of the retention so we generally recommend that the escrow sum is calculated as 3 x the highest-forecast monthly payment in the cash flow forecast, so that the Contractor is never left exposed.

== What Happens at the End of the Construction Project? ==

If the Contractor manages to secure 3-3.5 months' of forecast valuations, we then generally recommend that the last two months of valuations before practical completion are paid to the Contractor directly from the escrow, with the first release of retention also being made from the escrow, and then the second half of retention retained in escrow during the rectification period. Any residue left in the account is returned to the Employer at practical completion.

== How to Introduce Construction Escrow to the Client ==

=== Mention It Early and With Confidence ===

The earlier escrow is introduced in discussions, the more likely it is to be accepted by the Employer. They get used to hearing about it and have had longer to consider it and plan for the required cash deposit.

Contractors should confidently propose it as a standard part of doing business, as early as the first meeting with the client when they explain how they work, discuss credit arrangements and any guarantees. This is especially so on higher-value projects or those with overseas Employers. By framing it as a professional safeguard for both parties, this avoids appearing overly defensive or mistrustful or souring discussions during the tender process.

=== Frame It as Part of the Credit Negotiation ===

Escrow can be positioned as a balanced trade-off in credit terms. For instance, a Contractor might offer more favourable credit terms in return for the assurance of escrowed funds. This approach allows the client to see the proposal as a reciprocal measure rather than a one-sided demand.

=== Include It in the Pricing Document ===

The cost of the escrow naturally sits alongside the rows in the tender for insurances, bonds, guarantees and warranties in the preliminaries part of a tender return - the Employer probably won't include it in any draft bill of quantities, but the Contractor should definitely insert the line.

== Alternatives to Construction Escrow ==

While construction escrow offers distinct advantages, it is not the only method of securing payments.

Performance bonds remain widespread, particularly in public procurement or where institutional lenders require them. However, as noted above, they can be slow and inflexible.

Parent company or other payment guarantees from the Employer are another option, but their enforceability depends on the financial strength of the guarantor and can complicate relationships. Often, clients whose assets are held in trust or through corporate wealth structures will be slow to agree to giving personal guarantees.

Project Bank Accounts ("PBA's") have gained a lot of traction recently, particularly on public sector projects. They aim to ensure prompt payment to all supply chain tiers, but lack the tailored conditions and control escrow offers. They also deprive the Contractor of the sub-contractor cashflow which many Contractors find unpalatable.

Each alternative has merits, but none offers the same blend of flexibility, transparency, and enforceability as construction escrow - particularly when managed through modern escrow platforms like [https://www.dospay.co.uk/ https://www.dospay.co.uk/]

== How Much Does Construction Escrow Cost? ==

For Contractors and Employers seeking a modern, trustworthy solution, dospay offers a bespoke escrow service tailored to the construction industry. Funds are held securely and released only when agreed criteria are met, and all of this is managed through a user-friendly digital platform.

This not only increases efficiency and transparency but also ensures that both parties are protected throughout the project’s lifecycle. By engaging with a specialist provider, Contractors can differentiate themselves and set a professional tone for the project.

Pricing is done on a project-by-project basis, and we are happy to provide early quotes for Contractors when they are at the tender stage. This way, everyone knows from the beginning how much it will cost.

== Conclusion ==

Construction escrow is a powerful tool for mitigating non-payment risk in projects, reducing disputes, and fostering trust between Contractors and Employers. It offers simplicity, flexibility, and legal robustness - all attributes that are especially valuable in today’s high-stakes construction environment.

By introducing escrow early in project discussions and framing it as a mutual benefit, Contractors can protect their cash flow while enhancing their commercial credibility. As traditional security methods face growing scrutiny, escrow, particularly when implemented through platforms like dospay, is set to become the new standard for responsible contracting.

[[Category:Definitions]] [[Category:Education]] [[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]] [[Category:Products_/_components]]

Construction escrow

2025-07-31T10:32:30Z

Peter Hillyard: Created page with "= Construction Escrow: A Contractor's Guide = == What is Construction Escrow and How Does It Work? == Construction escrow is a financial arrangement designed to protect all par..."

Project bank account

2025-01-22T13:04:08Z

Peter Hillyard:

Project bank accounts (PBA) have emerged as a means of enabling faster payments through the construction supply chain, with payments being made as soon as 5 days from the due date. This is intended to reduce cash flow problems that can lead to supply chain members becoming insolvent, which is potentially catastrophic for projects, both in terms of money and time.

The government suggests that, ‘Historically, it is has not been unusual for lower tier supply chain members to have to wait for up to 100 days to receive payment, which damages their cash flow and can harm their business.’ Ref Cabinet Office, [https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/62117/Project-Bank-Accounts-briefing.pdf Project Bank Accounts – Briefing document].

In September 2009 the Government Construction Board proposed that government projects should begin to adopt project bank accounts unless there were compelling reasons not to do so. In 2011, the Government Construction Strategy set a target for £4bn of contracts to be awarded using project bank accounts by the end of 2013 to 2014.

In 2014, Francis Maude, Minister for the Cabinet Office, announced that £5.2bn worth of government construction projects were being paid through project bank accounts, including projects such as Crossrail. Maude stated, “To win the global race, we must support the smaller suppliers which are the lifeblood of our economy.” Ref Construction Enquirer, [http://www.constructionenquirer.com/2014/07/04/project-bank-accounts-in-use-on-half-government-jobs/ Project bank accounts in use on half government jobs].

Project bank accounts are ring-fenced accounts from which payments are made directly and simultaneously by the client to all parties in the supply chain. Funds in the account can only be paid to beneficiaries, that is, members of the supply chain named in the account (the lead contractor and supply chain members).

As a consequence, supply chain members do not have to wait for higher-tier contractors to process payments, they receive them directly. This ensures:

* Certainty of payment.
* Security of payment.
* Speed of payment.
* Transparency.
* A reduction in the need for borrowing or financing credit.
* A reduction in the need to chase payments.
* A reduction in disputes.

This does not affect procedures for valuing and certifying payments, and does not remove the lead contractor’s responsibility for selecting and managing the supply chain.

A number of banks offer project bank accounts for construction projects, including Lloyds, Santander and Bank of Scotland Group/NatWest. Contracts such as NEC3, the Project Partnering Agreement (PPC2000) and the JCT contracts also provide for project bank accounts.

Project bank accounts are best suited to projects with complex supply chains, irrespective of the size of the project. They can be ‘dual authority’ or ‘single authority’ accounts depending on whether both the client and lead contractor instruct payments, or only the lead contractor. The account is held in the names of trustees (the client and lead contractor for dual authority accounts or just the lead contractor for single authority accounts). This trustee status means that in the case of insolvency amounts payable to the supply chain are secure and can only be paid to them.

Project bank accounts should extend down to at least tier 3 contractors and 80% of the value of sub-contract payments. Suppliers should only not participate if; the value of the contract is too low, or they are paid more frequently than a monthly cycle, or if they are not vulnerable suppliers and do not wish to participate.

The government estimates that project bank accounts can save approximately 1% of the cost of construction.

In September 2016, the Scottish government announced that project bank accounts would be used on all of its building projects with a value of more than £4m from 31 October 2016. Stirling-based Robertson Group warned that main contractors would have to rebalance margins as a result of the move. Chairman Bill Robertson said, "... if the intended project bank account process promoted by the public sector is pursued across the industry, the additional profit element required to operate such a scheme will require a rebalancing of margins within the industry.”

In December 2017, the Welsh government announced that it would use project bank accounts on all building projects over £2m procured by government bodies from 1st January 2018. A guidance note was issued to accompany the announcement. Ref [http://prp.gov.wales/toolkit/?lang=en http://prp.gov.wales/toolkit/?lang=en]

In January 2019, Debbie Abrahams, MP for Oldham East and Saddleworth, brought forward a ten minute rule bill to require public authorities to pay suppliers using project bank accounts. It was agreed that the bill would be read a second time on 1 March. Ref [http://www.constructionmanagermagazine.com/news/second-reading-project-bank-accounts-bill/ http://www.constructionmanagermagazine.com/news/second-reading-project-bank-accounts-bill/]

In February 2019, the Scottish Government announced that from 19 March, its thresholds would be reduced so that public bodies would have to include project bank accounts in tender documents for building contracts worth £2m or more and civil engineering projects worth £5m or more.

In March 2020, Costain announced it was is seeking a £100m equity injection from shareholders, partly as a result of the introduction of project bank accounts, saying: ‘There has been an increase in the use of joint operation delivery structures and project bank accounts, as clients and partners respond to the impact of the well-documented failure of certain contractors in the sector by requiring increased direct control over their financial risk profiles – this has resulted in an increase in the level of Costain’s balance sheet cash being held in such joint operation structures and project bank accounts, rather than being freely available for the Group to use for general working capital purposes; and… The introduction of the Prompt Payment Code whereby contractors are required to pay their suppliers earlier has also resulted in higher working capital requirements.’ Ref [https://www.costain.com/media/598947/c-users-sopeel-desktop-equity-raise-announcement-final-10032020.pdf https://www.costain.com/media/598947/c-users-sopeel-desktop-equity-raise-announcement-final-10032020.pdf]

In May 2021, it was revealed that the government was not monitoring the use of project bank accounts. Ref [https://www.theconstructionindex.co.uk/news/view/project-bank-account-usage-not-being-monitored-by-government https://www.theconstructionindex.co.uk/news/view/project-bank-account-usage-not-being-monitored-by-government]

In June 2023, the Government blocked an amendment to the Procurement Bill proposed by Debbie Abrahams MP that would have made project bank accounts mandatory for all jobs valued at over £2m. Cabinet Office minister Alex Burghart said; "...it is not the Government’s position that PBAs should be mandated across all contracting authorities, as they are not always suitable or cost-effective, particularly where the subcontractor is very small or is paid more frequently than monthly, or where the supply chain is short."

The 2025 updated directory of PBA providers can be found here - [https://www.dospay.co.uk/articles/uk-project-bank-account-providers UK Project Bank Account Providers]

= Related articles on Designing Buildings =

* Cash flow.
* Construction supply chain payment charter.
* Escrow.
* Fair payment practices.
* Government Construction Board.
* Government construction strategy.
* Housing Grants Construction and Regeneration Act.
* Integrated supply chain.
* Interim payment.
* Payment notice.
* Project bank accounts hep tackle payment abuse.
* Prompt payment code.
* Remedies for late payment.
* Scheme for construction contracts.
* Supply chain.

= External references =

* The B1M, [http://www.theb1m.com/video/what-are-project-bank-accounts-pbas What are Project Bank Accounts?] (short animation). 15 June 2016.
* Construction Enquirer, [http://www.constructionenquirer.com/2014/07/04/project-bank-accounts-in-use-on-half-government-jobs/ Project bank accounts in use on half government jobs]. 4 July 2014.
* Cabinet office, [https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/62117/Project-Bank-Accounts-briefing.pdf Project Bank Accounts – Briefing document]. 10th February 2012.
* Cabinet office, [https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/62118/A-guide-to-Project-Bank-Accounts-in-construction-for-government-clients-July-2012.pdf A Guide to the implementation of Project Bank Accounts (PBAs) in construction for government clients], 03 July 2012.

[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:DCN_Policy]] [[Category:Client_procedures]] [[Category:Construction_management]] [[Category:Contracts_/_payment]] [[Category:Public_procedures]]

5 reasons clients prefer Project Bank Accounts

2025-01-22T12:55:42Z

Peter Hillyard:

In essence, [https://www.dospay.co.uk/third-party-managed-accounts/project-bank-accounts Project Bank Accounts] are special-purpose ring-fenced bank accounts that are set up with trust status to be used on construction projects - the money destined for the project is paid in, and then the administrators of the Project Bank Account (or 'PBA') use that money to pay the supply chain directly each month.

While the traditional payment model (contractor works for a month, claims money, waits a month for payment, with an equivalent downstream process for all of the sub-contractors and sub-sub-contractors) can lead to payment times of 60-90 days or more, with a Project Bank Account the entire supply chain can be paid within 7-14 days.

Not only to PBA's represent best-practice in ensuring fair and prompt payment to the entire supply chain, improving the cash flow of all participants, they can also significantly reduce the risk of insolvency throughout the supply chain by ensuring that everyone is paid promptly for the work they have done - this means the whole project is significantly more likely to succeed.

== 1. Your money, your project ==

=== And only used for your project. ===

By far and away, the principle benefit of Project Bank Accounts is that as a client, your money is only used for your project. In the traditional main contracting scenario, the client takes a risk on the main contractor's creditworthiness, placing their funds in the general pool of contractor funds that can be used for any of the contractor's projects.

If a contractor has a 'disaster' project (perhaps unexpected challenges are met on site; perhaps another of their clients becomes sanctioned; perhaps another of their clients cannot pay for another reason), they will have to use their general funds to cover their costs and their own downstream contractual obligations to their supply chains on all of their projects ('pay when paid' having been outlawed in 1998). This means that even the most creditworthy, best-intentioned contractor might have a 'rainy day' that means suddenly their finances are stretched very thin.

By implementing a project bank account, however, your funds are only passed to the main contractor for their bit of the work - all of your specialist sub-contractors, suppliers, and even your consultant team can be paid directly from the Project Bank Account. If the absolute worst happens to your main contractor and they become insolvent, at least everyone underneath them in the supply chain has been paid up to date. That means you won't have to pay twice if you need to bring in a replacement main contractor.

=== Contractor Selection ===

Anecdotally, we have received a lot of feedback from client representatives, project managers and quantity surveyors involved in competitive works tendering that the use of Project Bank Accounts also serves as a very helpful tool to mitigate the perils involved in appointing a tenderer with a lower price who perhaps has a lower credit rating or less experience in undertaking projects of the required size.

By using a Project Bank Account, the client team can much more comfortably appoint from a wider pool of possible tenderers, driving up quality and encouraging keener pricing by increasing the field of competitors for a project.

== 2. Cost savings ==

The received wisdom is that Project Bank Accounts are difficult to set up and expensive to administer - while this isn't our experience (we can generally get them open in a matter of days, and our pricing is significantly eclipsed by the risk and cost savings on offer), it is certainly something an argument that PBA proponents often encounter.

=== Keener pricing ===

Any perceived additional cost or complexity can readily be offset by the keener pricing on offer throughout the supply chain. Anecdotally, our experience is that sub-contractors will be prepared to extend discounts of 3-5% on their works for a guarantee of prompt payment from a Project Bank Account, and those savings are compounded when one considers that everyone higher up the supply chain will be adding their own overheads and profit on those figures.

In addition to this, the whole supply chain has less cash flow to finance. If sub-contractors are being paid in 7 days, and don't have to cover their own running costs, materials and work in progress for 60-90 days, they can afford to reduce their margins while still maintaining healthy net profits and ensuring their own ongoing viability.

The issue of compounded risk factors also factors into the price savings. A third-tier sub-contractor is taking a credit risk not only on the ultimate client, but on the main contractor and the second-tier sub-contractor. This risk has to be included in their pricing, given the prevalence of construction sector insolvencies, so the client pays for that. The client then pays for the next tier up's risk factor, and OH/P on the lower tier's risk factor, and so on.

In total, therefore, the client is paying a huge sum of money to support a payment structure which exposes that same client to significant risks - the client is losing both ways.

By employing a Project Bank Account, however, the client mitigates all the insolvency risk in the chain, and doesn't have to pay for that insolvency risk either.

=== Lower preliminaries ===

If you imagine a supply chain with one main contractor, 5 sub-contractors and another 5 sub-sub-contractors (not a huge supply chain in itself), that requires that every month, 11 businesses are organising and making payments. The supply-chain compounding effect means that the Employer is paying for all 11, but through the main contract is also paying OH/P on the 5 sub-contractors and 2 x OH/P on the 5 sub-sub-contractors!

Not paying the various supply chain members for the administrative cost of making the payments and, instead, employing a Project Bank Account saves significantly on the resource and cost of the making of monthly payments.

=== No Employer payment overhead ===

While the main contracting / management contracting setup is effective at consolidating the payments for construction operations, the Employer is often left having to pay consultants, interior designers and even some specialist suppliers directly.

Through a project bank account, however, all of this payment can be consolidated so that the client's own payment function does not need to accommodate the needs of the construction project.

=== Lower risk of interest/disputes/suspension ===

Sometimes, for whatever reason, it simply isn't possible to pay on time. It may be that a second signatory is required and they are sick/on holiday/unavailable; or there might be a much more long-term issue - solvency, sanctions, asset freezes and the like - either way, late payment under a construction contract will generally mean that the Employer has to pay interest on the overdue sums.

In addition to this, in the event of a longer-term payment issue, late payment can entail suspension of the works (and all of the attendant costs), or even adjudication and expensive disputes. These can readily be avoided by use of a project bank account.

== 3. Simplification of payments ==

Construction payment cycles are, necessarily, quite complex. While on first blush, they appear straightforward, the proliferation of payment-related disputes, smash-and-grab adjudications and their enforcements, and the vernacular of payment certificates, pay less notices and retentions mean that unless the client is an experienced procurer of construction projects, any sort of payment obligations become all the more burdensome.

When the client is based overseas, or has their affairs structured through trusts, holding companies and/or family offices, this becomes more complicated still - governance requirements for signatories; trustee requirements for comfort and international money movement restrictions can all lead to an otherwise straightforward process becoming quite protracted.

To compound matters, in the event a payment is made late, the spectres of interest, suspension and adjudication also linger on the horizon.

PBA's make the process altogether smoother: The Contract Administrator issues a Payment Certificate. Unless a pay less notice has been brought to their attention, on the final date for payment, the project bank account will pay the invoice. It's that easy.

== 4. Mandatory in government projects ==

Project Bank Accounts have found favour in public procurement projects in the UK and overseas.

In England, since 2012, they have been an expected payment mechanism. The Government briefing paper set out the reasoning as follows:

Simple though the concept is, PBAs directly deliver against a range of the aims of the Government Construction Strategy. By addressing unfair payment practices, benefits will accrue to the whole supply team, by ensuring transparency of and certainty of payment. In particular, for the SMEs down the supply chain PBAs will protect their often very fine margins, obviate the need for unnecessary borrowing and can lead to a much more balanced trading environment, hence supporting growth. Cost savings accrue from supply chain members not having to chase payment or having to finance lengthy credit periods. PBAs eliminate payment disputes and the costs associated with them (which ultimately feed back into costs for the client). They also help the supply chain concentrate on the job in hand and reinforce or facilitate team working. Increased trust leads to greater collaboration, which in turn incentivises innovation.

National Highways has made Project Bank Accounts automatic for all of its NEC suppliers. According to Lloyd Biddell, head of cost intelligence at National Highways,

We have been using project bank accounts for over a decade and they have proven a great benefit to many of our suppliers. The current opt-in process can make the process daunting or confusing for our smallest suppliers, who are often the ones most likely to benefit from them. We are now making it even easier by automatically including them on project bank accounts unless they choose to opt out.

In Wales, for construction and infrastructure projects of £2m or more that are fully-, part- or grant-funded by the Welsh Government must use a Project Bank Account unless there are compelling reasons not to do so - where such compelling reasons are identified a decision report detailing those reasons must be completed and filed to allow for audit. Policy Notice WPPN-0321 provides:

2.5 Small to medium enterprises (SMEs) play critical roles in the delivery of public sector projects through sub-contracting arrangements. Access to finance and cash flow are vital to any business and no more so than smaller businesses with limited resources. It is therefore essential that public sector clients ensure fair and prompt payment, not only to our tier 1 contractors but throughout their supply chains when delivering public contracts. 2.5.1 PBAs are ring-fenced bank accounts with trust status that act solely as a mechanism for making payments. PBAs replace the traditional multi-layered payment terms between subsequent tiers in the supply chain with simultaneous payments to the lead contractor and supply chain partners. Traditional payment methods have resulted in sub-contractors commonly having to manage 60-90 day, or longer payment terms in some instances, whereas payments via a PBA typically take between 3-5 days from the deposit of money into the account following certification of the payment schedule. 2.5.2 PBAs have the added benefit of streamlining payment processes for clients, contractors and sub-contractors. Sub-contractors further benefit from PBAs as they alleviate the time and cost burden of chasing late payments and dispute resolution proceedings by ensuring timeliness and certainty of payment.

Scotland also introduced Project Bank Accounts in 2019 for any project with an estimated value over £2m for building projects or £5m for civil engineering projects.

== 5. Transparency & Compatibility ==

Project Bank Accounts promote compliance with the principles of the Prompt Payment Code - payment is both more transparent and it is far easier to manage actual payment timescales.

The final benefit of Project Bank Accounts is that they are compatible with any kind of construction contract - they are simply a payment service which helps the client in delivering the physical payment required.

== Conclusion ==

It's clear to see why clients prefer [https://www.dospay.co.uk/third-party-managed-accounts/project-bank-accounts Project Bank Accounts] - and although there are not 100's of Project Bank Account Suppliers, there are plenty of us and the exercise of opening and running one is much less complicated than you may have been led to believe

--[[User:Peter_Hillyard|Peter Hillyard]]

[[Category:Articles_needing_more_work]]

Security for Expenses Deposit Providers (2025

2025-01-22T12:44:42Z

Peter Hillyard:

If you need to deposit [https://www.securityforexpensesscheme.org/ Security for Expenses] under the Party Wall Act while you carry out construction works, you've come to the right place - we round up the options for you to consider when it comes to choosing a provider for your security for expenses / party wall escrow.

== Choosing your Security for Expenses deposit firm ==

Choosing your supplier is important - you may wish to check a few things before engaging with one of them, including what each supplier provides for the following:

=== How much do the arrangements cost? ===

All Party Wall Act Security for Expenses deposit providers (apart from the [https://www.securityforexpensesscheme.org/ Security for Expenses Scheme]) will charge you a fee. This fee will often include elements for compliance, for an escrow agreement, and some will also charge a percentage of the amount being deposited.

=== Where is the security held? ===

As far as we are aware, no banks offer security for expenses deposits directly. This means that all providers deposit your expenses at an underlying bank. In practical terms, therefore, you might be taking a risk on the underlying solvency of the bank when you make your deposit.

=== Are the funds segregated and safeguarded? ===

Segregation means 'kept apart from' the supplier's own operational funds. Safeguarding means that the funds are not used for anything by the bank that is holding them and they are kept available to the depositor in the event of the supplier's insolvency.

While all agents, in practice, will segregate funds, not everyone is required to safeguard funds. This means you will wish to enquire as to the safeguarding arrangements in place (including seeing any terms and conditions or safeguarding letter) to ensure that in the event that your supplier becomes insolvent while you are carrying out your works, your deposit remains available to be returned to you at the end.

=== Are there any hidden costs? ===

Do the fees you have been quoted include, for example, all bank transfers, any changes made to your party wall award, new surveyors, compliance arrangements, etc?

=== What are the terms and conditions? ===

What are the rules governing your deposit? Are they clear, concise and easy to understand? Do they contain jargon or terms that feel unnatural or inconvenient? Do they offer a simple, low-cost dispute resolution procedure in the event that you have an issue?

== Security for Expenses Scheme ==

The independent [https://www.securityforexpensesscheme.org/ Security for Expenses Scheme] was set up in early 2025 to provide a free alternative to the existing suppliers. We are run by DOS & Co., an experienced escrow agent who has already been carrying out Party Wall Escrow services for many years, but as a standalone scheme with one singular purpose: free, safe security for expenses deposits for all.

=== Free of charge. ===

The [https://www.securityforexpensesscheme.org/ Security for Expenses Scheme] carries no account fees. There are no hidden charges for compliance, due diligence, changes to your bank account, bank charges, percentages of the Security sum, or the like. Our accounts are 100% funded by the interest, if any, we receive on the Security while we are holding it.

The only time we may charge you a fee is if we are required to participate in any dispute (the 'dispute fee'). This is because we have based our free service on a known scope of work and amount of time and resource which relates specifically to the operation of the account under these standard rules. You can read more about this on our [https://www.securityforexpensesscheme.org/documentation/scheme-rules#dispute-fees Scheme Rules].

=== Held at the Bank of England. ===

Under the [https://www.securityforexpensesscheme.org/ Security for Expenses Scheme] your security is held liquid and unencumbered at the Bank of England. It doesn't get any safer than this, but you will take additional comfort from the fact that the funds are both segregated and safeguarded there.

=== Segregated and Safeguarded. ===

Your security is segregated (kept separate from our own operational funds). It is also safeguarded (not used by us, or our bankers) and simply sits there, in cash, liquid and unencumbered at the Bank of England, in an account that only contains your security for your specific Party Wall Award.

=== No hidden costs. ===

Our cost base is simple - we don't charge any fees at all unless there is a dispute that we are required to become involved with. You can read more about this on our [https://www.securityforexpensesscheme.org/documentation/scheme-rules#dispute-fees Scheme Rules].

=== Simple, clear Scheme Rules ===

There are only 6 rules to our Scheme, and most of the contents relate to the mandatory compliance checks that we are required to carry out as a registered supplier of payment/escrow services in the UK.

What's really important about these Scheme Rules, however, is that in the (very) unlikely event of a dispute, we have agreed to a low-cost expedited arbitration agreement - you can get your funds back quickly and cheaply, without having to go to court.

=== Fast account opening, 24/7 ===

Through our innovative Security for Expenses Portal, you can open your deposit account at any time of day or night. The first time you use us, you'll need to complete our mandatory compliance checks. Thereafter, you can open an account by simply uploading a Party Wall Award. It's literally that easy.

== Security for Expenses by dospay ==

dospay is another service operated by DOS & Co. It is designed for more complex or higher-value escrow arrangements. They also provide [https://www.dospay.co.uk/escrow-accounts/party-wall-escrow Party Wall Escrow] services, but they provide them on bespoke terms and conditions, and those accounts are not free of charge. In the event you don't meet the eligibility requirements of the Scheme Rules, or you would like to negotiate a change to the terms and conditions of our service, you can request a quote on dospay's website for your exact requirements.

== RICS Surveyors ==

RICS Surveyors are able to open client accounts to hold security for expenses, but they are only allowed to do so if they are one of the surveyors appointed under the Act and named in your Party Wall Award. We compare our service to theirs [https://www.securityforexpensesscheme.org/alternatives/securityforexpenses-co-uk here] (this is is provided in good faith based on the information available on their websites at the end of December 2024 - you will need to check that our comparison remains accurate and up to date).We compare our service to theirs [https://www.securityforexpensesscheme.org/alternatives/riverside-escrow here] (this is is provided in good faith based on the information available on their websites at the end of December 2024 - you will need to check that our comparison remains accurate and up to date).We compare our service to theirs [https://www.securityforexpensesscheme.org/alternatives/securityforexpenses-co-uk here] (this is is provided in good faith based on the information available on their websites at the end of December 2024 - you will need to check that our comparison remains accurate and up to date).

Generally-speaking, neither neighbour is particularly comfortable about the other's surveyor holding the funds - while surveyors are subject to professional rules of conduct, and can be expected always to act in an appropriate manner, there is at least the outside risk of a possible perception of potential bias. With free accounts available through this Scheme, there seems little reason to take such a risk.

== Other third-party providers ==

We are aware of other third-party security for expenses deposit providers:

=== Security for Expenses Ltd ===

Security for Expenses Ltd is an independent third-party supplier where you can deposit security for expenses and open other related accounts. We compare our service to theirs [https://www.securityforexpensesscheme.org/alternatives/securityforexpenses-co-uk here] (this is is provided in good faith based on the information available on their websites at the end of December 2024 - you will need to check that our comparison remains accurate and up to date).

=== Riverside Escrow ===

Riverside Escrow is affiliated with the law firm Herrington Carmichael LLP and they also provide the ability to accept deposits of security. We compare our service to theirs [https://www.securityforexpensesscheme.org/alternatives/riverside-escrow here] (this is is provided in good faith based on the information available on their websites at the end of December 2024 - you will need to check that our comparison remains accurate and up to date).

=== Elemental CoSec ===

Elemental CoSec advertises Party Wall Escrow on its website. We compare our service to theirs [https://www.securityforexpensesscheme.org/alternatives/elemental here] (this is is provided in good faith based on the information available on their websites at the end of December 2024 - you will need to check that our comparison remains accurate and up to date).

--[[User:Peter_Hillyard|Peter Hillyard]]

‍

[[Category:Articles_needing_more_work]]

An Introduction to Security for Expenses Simply put: A temporary cash deposit while building works are carried out to a party wall.

2025-01-21T15:05:00Z

Peter Hillyard: Protected "An Introduction to Security for Expenses Simply put: A temporary cash deposit while building works are carried out to a party wall.": Protecting content ([edit=author] (indefinite) [move=author] (indefinite))

Security for expenses in Party Wall matters is a way to protect both the person doing the building work and their neighbour by setting funds aside in a secure account.‍

== Overview of the Party Wall Act and Security for Expenses‍ ==

The Party Wall etc. Act 1996 (‘Party Wall Act’) exists to protect building owners when a neighbour carries out work on or near a shared wall or boundary. Section 12 of this Act allows either the building owner or the adjoining owner to request a sum of money—known as ‘Security for Expenses’—to be put aside in case damage is caused, or if the works remain unfinished.

If you plan to carry out building works, your neighbour may require you to deposit these funds. Equally, if your neighbour insists you do additional work that you must partly finance, you can request they provide security too. This money is usually held in a separate, ring-fenced bank account until the surveyors on both sides confirm the work is complete and meets the necessary standards.

== Who Holds Security?‍ ==

The Act does not specify who should hold the funds or how. It simply says you and your neighbour must agree on acceptable arrangements for security. Many opt to use an escrow service like this Scheme. Solicitors sometimes hold these funds, but professional rules mean they can only do so in certain circumstances. Companies authorised by the Financial Conduct Authority (‘FCA’) can hold escrow funds specifically for this purpose.

== How Security for Expenses Escrow Works ==

# Surveyors agree the sum: Each owner appoints a surveyor, who then work out how much should be deposited and where.
# Escrow vs. Non-Negligence Insurance: A typical home insurance policy usually covers negligent damage, but some harm can occur without negligence. Non-negligence insurance covers this, but it may have limitations. Security for Expenses provides extra protection beyond or instead of insurance.
# Set up the account: After straightforward compliance checks, the escrow provider creates an account. The parties sign an Escrow Agreement (often in a standard form) to lay out the terms.
# Deposit the funds: When work is about to start, the agreed amount is placed in the escrow account. Everyone, including surveyors, can track these funds.
# Release on completion: When the surveyors confirm the work is complete and satisfactory, the funds go back to the person who deposited them.

You can open a free Security for Expenses account using this Scheme. Visit our [https://www.securityforexpensesscheme.org/portal Security for Expenses Portal] to get started.

An Introduction to Security for Expenses Simply put: A temporary cash deposit while building works are carried out to a party wall.

2025-01-21T15:04:22Z

Peter Hillyard: Created page with "Security for expenses in Party Wall matters is a way to protect both the person doing the building work and their neighbour by setting funds aside in a secure account.‍ == Ove..."

5 reasons clients prefer Project Bank Accounts

2025-01-21T09:59:09Z

Peter Hillyard: Protected "5 reasons clients prefer Project Bank Accounts": Protecting content ([edit=author] (indefinite) [move=author] (indefinite))

In essence, [https://www.dospay.co.uk/third-party-managed-accounts/project-bank-accounts Project Bank Accounts] are special-purpose ring-fenced bank accounts that are set up with trust status to be used on construction projects - the money destined for the project is paid in, and then the administrators of the Project Bank Account (or 'PBA') use that money to pay the supply chain directly each month.

While the traditional payment model (contractor works for a month, claims money, waits a month for payment, with an equivalent downstream process for all of the sub-contractors and sub-sub-contractors) can lead to payment times of 60-90 days or more, with a Project Bank Account the entire supply chain can be paid within 7-14 days.

Not only to PBA's represent best-practice in ensuring fair and prompt payment to the entire supply chain, improving the cash flow of all participants, they can also significantly reduce the risk of insolvency throughout the supply chain by ensuring that everyone is paid promptly for the work they have done - this means the whole project is significantly more likely to succeed.

== 1. Your money, your project ==

=== And only used for your project. ===

By far and away, the principle benefit of Project Bank Accounts is that as a client, your money is only used for your project. In the traditional main contracting scenario, the client takes a risk on the main contractor's creditworthiness, placing their funds in the general pool of contractor funds that can be used for any of the contractor's projects.

If a contractor has a 'disaster' project (perhaps unexpected challenges are met on site; perhaps another of their clients becomes sanctioned; perhaps another of their clients cannot pay for another reason), they will have to use their general funds to cover their costs and their own downstream contractual obligations to their supply chains on all of their projects ('pay when paid' having been outlawed in 1998). This means that even the most creditworthy, best-intentioned contractor might have a 'rainy day' that means suddenly their finances are stretched very thin.

By implementing a project bank account, however, your funds are only passed to the main contractor for their bit of the work - all of your specialist sub-contractors, suppliers, and even your consultant team can be paid directly from the Project Bank Account. If the absolute worst happens to your main contractor and they become insolvent, at least everyone underneath them in the supply chain has been paid up to date. That means you won't have to pay twice if you need to bring in a replacement main contractor.

=== Contractor Selection ===

Anecdotally, we have received a lot of feedback from client representatives, project managers and quantity surveyors involved in competitive works tendering that the use of Project Bank Accounts also serves as a very helpful tool to mitigate the perils involved in appointing a tenderer with a lower price who perhaps has a lower credit rating or less experience in undertaking projects of the required size.

By using a Project Bank Account, the client team can much more comfortably appoint from a wider pool of possible tenderers, driving up quality and encouraging keener pricing by increasing the field of competitors for a project.

== 2. Cost savings ==

The received wisdom is that Project Bank Accounts are difficult to set up and expensive to administer - while this isn't our experience (we can generally get them open in a matter of days, and our pricing is significantly eclipsed by the risk and cost savings on offer), it is certainly something an argument that PBA proponents often encounter.

=== Keener pricing ===

Any perceived additional cost or complexity can readily be offset by the keener pricing on offer throughout the supply chain. Anecdotally, our experience is that sub-contractors will be prepared to extend discounts of 3-5% on their works for a guarantee of prompt payment from a Project Bank Account, and those savings are compounded when one considers that everyone higher up the supply chain will be adding their own overheads and profit on those figures.

In addition to this, the whole supply chain has less cash flow to finance. If sub-contractors are being paid in 7 days, and don't have to cover their own running costs, materials and work in progress for 60-90 days, they can afford to reduce their margins while still maintaining healthy net profits and ensuring their own ongoing viability.

The issue of compounded risk factors also factors into the price savings. A third-tier sub-contractor is taking a credit risk not only on the ultimate client, but on the main contractor and the second-tier sub-contractor. This risk has to be included in their pricing, given the prevalence of construction sector insolvencies, so the client pays for that. The client then pays for the next tier up's risk factor, and OH/P on the lower tier's risk factor, and so on.

In total, therefore, the client is paying a huge sum of money to support a payment structure which exposes that same client to significant risks - the client is losing both ways.

By employing a Project Bank Account, however, the client mitigates all the insolvency risk in the chain, and doesn't have to pay for that insolvency risk either.

=== Lower preliminaries ===

If you imagine a supply chain with one main contractor, 5 sub-contractors and another 5 sub-sub-contractors (not a huge supply chain in itself), that requires that every month, 11 businesses are organising and making payments. The supply-chain compounding effect means that the Employer is paying for all 11, but through the main contract is also paying OH/P on the 5 sub-contractors and 2 x OH/P on the 5 sub-sub-contractors!

Not paying the various supply chain members for the administrative cost of making the payments and, instead, employing a Project Bank Account saves significantly on the resource and cost of the making of monthly payments.

=== No Employer payment overhead ===

While the main contracting / management contracting setup is effective at consolidating the payments for construction operations, the Employer is often left having to pay consultants, interior designers and even some specialist suppliers directly.

Through a project bank account, however, all of this payment can be consolidated so that the client's own payment function does not need to accommodate the needs of the construction project.

=== Lower risk of interest/disputes/suspension ===

Sometimes, for whatever reason, it simply isn't possible to pay on time. It may be that a second signatory is required and they are sick/on holiday/unavailable; or there might be a much more long-term issue - solvency, sanctions, asset freezes and the like - either way, late payment under a construction contract will generally mean that the Employer has to pay interest on the overdue sums.

In addition to this, in the event of a longer-term payment issue, late payment can entail suspension of the works (and all of the attendant costs), or even adjudication and expensive disputes. These can readily be avoided by use of a project bank account.

== 3. Simplification of payments ==

Construction payment cycles are, necessarily, quite complex. While on first blush, they appear straightforward, the proliferation of payment-related disputes, smash-and-grab adjudications and their enforcements, and the vernacular of payment certificates, pay less notices and retentions mean that unless the client is an experienced procurer of construction projects, any sort of payment obligations become all the more burdensome.

When the client is based overseas, or has their affairs structured through trusts, holding companies and/or family offices, this becomes more complicated still - governance requirements for signatories; trustee requirements for comfort and international money movement restrictions can all lead to an otherwise straightforward process becoming quite protracted.

To compound matters, in the event a payment is made late, the spectres of interest, suspension and adjudication also linger on the horizon.

PBA's make the process altogether smoother: The Contract Administrator issues a Payment Certificate. Unless a pay less notice has been brought to their attention, on the final date for payment, the project bank account will pay the invoice. It's that easy.

== 4. Mandatory in government projects ==

Project Bank Accounts have found favour in public procurement projects in the UK and overseas.

In England, since 2012, they have been an expected payment mechanism. The Government briefing paper set out the reasoning as follows:

Simple though the concept is, PBAs directly deliver against a range of the aims of the Government Construction Strategy. By addressing unfair payment practices, benefits will accrue to the whole supply team, by ensuring transparency of and certainty of payment. In particular, for the SMEs down the supply chain PBAs will protect their often very fine margins, obviate the need for unnecessary borrowing and can lead to a much more balanced trading environment, hence supporting growth. Cost savings accrue from supply chain members not having to chase payment or having to finance lengthy credit periods. PBAs eliminate payment disputes and the costs associated with them (which ultimately feed back into costs for the client). They also help the supply chain concentrate on the job in hand and reinforce or facilitate team working. Increased trust leads to greater collaboration, which in turn incentivises innovation.

National Highways has made Project Bank Accounts automatic for all of its NEC suppliers. According to Lloyd Biddell, head of cost intelligence at National Highways,

We have been using project bank accounts for over a decade and they have proven a great benefit to many of our suppliers. The current opt-in process can make the process daunting or confusing for our smallest suppliers, who are often the ones most likely to benefit from them. We are now making it even easier by automatically including them on project bank accounts unless they choose to opt out.

In Wales, for construction and infrastructure projects of £2m or more that are fully-, part- or grant-funded by the Welsh Government must use a Project Bank Account unless there are compelling reasons not to do so - where such compelling reasons are identified a decision report detailing those reasons must be completed and filed to allow for audit. Policy Notice WPPN-0321 provides:

2.5 Small to medium enterprises (SMEs) play critical roles in the delivery of public sector projects through sub-contracting arrangements. Access to finance and cash flow are vital to any business and no more so than smaller businesses with limited resources. It is therefore essential that public sector clients ensure fair and prompt payment, not only to our tier 1 contractors but throughout their supply chains when delivering public contracts. 2.5.1 PBAs are ring-fenced bank accounts with trust status that act solely as a mechanism for making payments. PBAs replace the traditional multi-layered payment terms between subsequent tiers in the supply chain with simultaneous payments to the lead contractor and supply chain partners. Traditional payment methods have resulted in sub-contractors commonly having to manage 60-90 day, or longer payment terms in some instances, whereas payments via a PBA typically take between 3-5 days from the deposit of money into the account following certification of the payment schedule. 2.5.2 PBAs have the added benefit of streamlining payment processes for clients, contractors and sub-contractors. Sub-contractors further benefit from PBAs as they alleviate the time and cost burden of chasing late payments and dispute resolution proceedings by ensuring timeliness and certainty of payment.

Scotland also introduced Project Bank Accounts in 2019 for any project with an estimated value over £2m for building projects or £5m for civil engineering projects.

== 5. Transparency & Compatibility ==

Project Bank Accounts promote compliance with the principles of the Prompt Payment Code - payment is both more transparent and it is far easier to manage actual payment timescales.

The final benefit of Project Bank Accounts is that they are compatible with any kind of construction contract - they are simply a payment service which helps the client in delivering the physical payment required.

== Conclusion ==

It's clear to see why clients prefer Project Bank Accounts - and although there are not 100's of [https://www.dospay.co.uk/articles/uk-project-bank-account-providers Project Bank Account Suppliers], there are plenty of us and the exercise of opening and running one is much less complicated than you may have been led to believe

Security for Expenses Deposit Providers (2025

2025-01-21T09:58:42Z

Peter Hillyard: Protected "Security for Expenses Deposit Providers (2025": Protecting content ([edit=author] (indefinite) [move=author] (indefinite))

If you need to deposit Security for Expenses under the Party Wall Act while you carry out construction works, you've come to the right place - we round up the options for you to consider when it comes to choosing a provider for your security for expenses / party wall escrow.

== Choosing your Security for Expenses deposit firm ==

Choosing your supplier is important - you may wish to check a few things before engaging with one of them, including what each supplier provides for the following:

=== How much do the arrangements cost? ===

All Party Wall Act Security for Expenses deposit providers (apart from the Security for Expenses Scheme) will charge you a fee. This fee will often include elements for compliance, for an escrow agreement, and some will also charge a percentage of the amount being deposited.

=== Where is the security held? ===

As far as we are aware, no banks offer security for expenses deposits directly. This means that all providers deposit your expenses at an underlying bank. In practical terms, therefore, you might be taking a risk on the underlying solvency of the bank when you make your deposit.

=== Are the funds segregated and safeguarded? ===

Segregation means 'kept apart from' the supplier's own operational funds. Safeguarding means that the funds are not used for anything by the bank that is holding them and they are kept available to the depositor in the event of the supplier's insolvency.

While all agents, in practice, will segregate funds, not everyone is required to safeguard funds. This means you will wish to enquire as to the safeguarding arrangements in place (including seeing any terms and conditions or safeguarding letter) to ensure that in the event that your supplier becomes insolvent while you are carrying out your works, your deposit remains available to be returned to you at the end.

=== Are there any hidden costs? ===

Do the fees you have been quoted include, for example, all bank transfers, any changes made to your party wall award, new surveyors, compliance arrangements, etc?

=== What are the terms and conditions? ===

What are the rules governing your deposit? Are they clear, concise and easy to understand? Do they contain jargon or terms that feel unnatural or inconvenient? Do they offer a simple, low-cost dispute resolution procedure in the event that you have an issue?

== Security for Expenses Scheme ==

The independent Security for Expenses Scheme (us) was set up in early 2025 to provide a free alternative to the existing suppliers. We are run by DOS & Co., an experienced escrow agent who has already been carrying out [https://www.dospay.co.uk/escrow-accounts/party-wall-escrow?ref=SES Party Wall Escrow] services for many years, but as a standalone scheme with one singular purpose: free, safe security for expenses deposits for all.

=== Free of charge. ===

Our Security for Expenses accounts carry no account fees. There are no hidden charges for compliance, due diligence, changes to your bank account, bank charges, percentages of the Security sum, or the like. Our accounts are 100% funded by the interest, if any, we receive on the Security while we are holding it.

The only time we may charge you a fee is if we are required to participate in any dispute (the 'dispute fee'). This is because we have based our free service on a known scope of work and amount of time and resource which relates specifically to the operation of the account under these standard rules. You can read more about this on our [https://www.securityforexpensesscheme.org/documentation/scheme-rules#dispute-fees Scheme Rules].

=== Held at the Bank of England. ===

Your security is held liquid and unencumbered at the Bank of England. It doesn't get any safer than this, but you will take additional comfort from the fact that the funds are both segregated and safeguarded there.

=== Segregated and Safeguarded. ===

Your security is segregated (kept separate from our own operational funds). It is also safeguarded (not used by us, or our bankers) and simply sits there, in cash, liquid and unencumbered at the Bank of England, in an account that only contains your security for your specific Party Wall Award.

=== No hidden costs. ===

Our cost base is simple - we don't charge any fees at all unless there is a dispute that we are required to become involved with. You can read more about this on our [https://www.securityforexpensesscheme.org/documentation/scheme-rules#dispute-fees Scheme Rules].

=== Simple, clear Scheme Rules ===

There are only 6 rules to our Scheme, and most of the contents relate to the mandatory compliance checks that we are required to carry out as a registered supplier of payment/escrow services in the UK.

What's really important about these Scheme Rules, however, is that in the (very) unlikely event of a dispute, we have agreed to a low-cost expedited arbitration agreement - you can get your funds back quickly and cheaply, without having to go to court.

=== Fast account opening, 24/7 ===

Through our innovative Security for Expenses Portal, you can open your deposit account at any time of day or night. The first time you use us, you'll need to complete our mandatory compliance checks. Thereafter, you can open an account by simply uploading a Party Wall Award. It's literally that easy.

== Security for Expenses by dospay ==

dospay is another service operated by DOS & Co. It is designed for more complex or higher-value escrow arrangements. They also provide [https://www.dospay.co.uk/escrow-accounts/party-wall-escrow Party Wall Escrow] services, but they provide them on bespoke terms and conditions, and those accounts are not free of charge. In the event you don't meet the eligibility requirements of the Scheme Rules, or you would like to negotiate a change to the terms and conditions of our service, you can [https://www.dospay.co.uk/request-a-quote request a quote] on dospay's website for your exact requirements.

== RICS Surveyors ==

RICS Surveyors are able to open client accounts to hold security for expenses, but they are only allowed to do so if they are one of the surveyors appointed under the Act and named in your Party Wall Award. We compare our service to theirs [https://www.securityforexpensesscheme.org/alternatives/securityforexpenses-co-uk here] (this is is provided in good faith based on the information available on their websites at the end of December 2024 - you will need to check that our comparison remains accurate and up to date).We compare our service to theirs [https://www.securityforexpensesscheme.org/alternatives/riverside-escrow here] (this is is provided in good faith based on the information available on their websites at the end of December 2024 - you will need to check that our comparison remains accurate and up to date).We compare our service to theirs [https://www.securityforexpensesscheme.org/alternatives/securityforexpenses-co-uk here] (this is is provided in good faith based on the information available on their websites at the end of December 2024 - you will need to check that our comparison remains accurate and up to date).

Generally-speaking, neither neighbour is particularly comfortable about the other's surveyor holding the funds - while surveyors are subject to professional rules of conduct, and can be expected always to act in an appropriate manner, there is at least the outside risk of a possible perception of potential bias. With free accounts available through this Scheme, there seems little reason to take such a risk.

== Other third-party providers ==

We are aware of other third-party security for expenses deposit providers:

=== Security for Expenses Ltd ===

Security for Expenses Ltd is an independent third-party supplier where you can deposit security for expenses and open other related accounts. We compare our service to theirs [https://www.securityforexpensesscheme.org/alternatives/securityforexpenses-co-uk here] (this is is provided in good faith based on the information available on their websites at the end of December 2024 - you will need to check that our comparison remains accurate and up to date).

=== Riverside Escrow ===

Riverside Escrow is affiliated with the law firm Herrington Carmichael LLP and they also provide the ability to accept deposits of security. We compare our service to theirs [https://www.securityforexpensesscheme.org/alternatives/riverside-escrow here] (this is is provided in good faith based on the information available on their websites at the end of December 2024 - you will need to check that our comparison remains accurate and up to date).

=== Elemental CoSec ===

Elemental CoSec advertises Party Wall Escrow on its website. We compare our service to theirs [https://www.securityforexpensesscheme.org/alternatives/elemental here] (this is is provided in good faith based on the information available on their websites at the end of December 2024 - you will need to check that our comparison remains accurate and up to date).

‍

5 reasons clients prefer Project Bank Accounts

2025-01-21T09:54:16Z

Peter Hillyard: Created page with "In essence, [https://www.dospay.co.uk/third-party-managed-accounts/project-bank-accounts Project Bank Accounts] are special-purpose ring-fenced bank accounts that are set up with..."

In essence, [https://www.dospay.co.uk/third-party-managed-accounts/project-bank-accounts Project Bank Accounts] are special-purpose ring-fenced bank accounts that are set up with trust status to be used on construction projects - the money destined for the project is paid in, and then the administrators of the Project Bank Account (or 'PBA') use that money to pay the supply chain directly each month.

While the traditional payment model (contractor works for a month, claims money, waits a month for payment, with an equivalent downstream process for all of the sub-contractors and sub-sub-contractors) can lead to payment times of 60-90 days or more, with a Project Bank Account the entire supply chain can be paid within 7-14 days.

Not only to PBA's represent best-practice in ensuring fair and prompt payment to the entire supply chain, improving the cash flow of all participants, they can also significantly reduce the risk of insolvency throughout the supply chain by ensuring that everyone is paid promptly for the work they have done - this means the whole project is significantly more likely to succeed.

== 1. Your money, your project ==

=== And only used for your project. ===

By far and away, the principle benefit of Project Bank Accounts is that as a client, your money is only used for your project. In the traditional main contracting scenario, the client takes a risk on the main contractor's creditworthiness, placing their funds in the general pool of contractor funds that can be used for any of the contractor's projects.

If a contractor has a 'disaster' project (perhaps unexpected challenges are met on site; perhaps another of their clients becomes sanctioned; perhaps another of their clients cannot pay for another reason), they will have to use their general funds to cover their costs and their own downstream contractual obligations to their supply chains on all of their projects ('pay when paid' having been outlawed in 1998). This means that even the most creditworthy, best-intentioned contractor might have a 'rainy day' that means suddenly their finances are stretched very thin.

By implementing a project bank account, however, your funds are only passed to the main contractor for their bit of the work - all of your specialist sub-contractors, suppliers, and even your consultant team can be paid directly from the Project Bank Account. If the absolute worst happens to your main contractor and they become insolvent, at least everyone underneath them in the supply chain has been paid up to date. That means you won't have to pay twice if you need to bring in a replacement main contractor.

=== Contractor Selection ===

Anecdotally, we have received a lot of feedback from client representatives, project managers and quantity surveyors involved in competitive works tendering that the use of Project Bank Accounts also serves as a very helpful tool to mitigate the perils involved in appointing a tenderer with a lower price who perhaps has a lower credit rating or less experience in undertaking projects of the required size.

By using a Project Bank Account, the client team can much more comfortably appoint from a wider pool of possible tenderers, driving up quality and encouraging keener pricing by increasing the field of competitors for a project.

== 2. Cost savings ==

The received wisdom is that Project Bank Accounts are difficult to set up and expensive to administer - while this isn't our experience (we can generally get them open in a matter of days, and our pricing is significantly eclipsed by the risk and cost savings on offer), it is certainly something an argument that PBA proponents often encounter.

=== Keener pricing ===

Any perceived additional cost or complexity can readily be offset by the keener pricing on offer throughout the supply chain. Anecdotally, our experience is that sub-contractors will be prepared to extend discounts of 3-5% on their works for a guarantee of prompt payment from a Project Bank Account, and those savings are compounded when one considers that everyone higher up the supply chain will be adding their own overheads and profit on those figures.

In addition to this, the whole supply chain has less cash flow to finance. If sub-contractors are being paid in 7 days, and don't have to cover their own running costs, materials and work in progress for 60-90 days, they can afford to reduce their margins while still maintaining healthy net profits and ensuring their own ongoing viability.

The issue of compounded risk factors also factors into the price savings. A third-tier sub-contractor is taking a credit risk not only on the ultimate client, but on the main contractor and the second-tier sub-contractor. This risk has to be included in their pricing, given the prevalence of construction sector insolvencies, so the client pays for that. The client then pays for the next tier up's risk factor, and OH/P on the lower tier's risk factor, and so on.

In total, therefore, the client is paying a huge sum of money to support a payment structure which exposes that same client to significant risks - the client is losing both ways.

By employing a Project Bank Account, however, the client mitigates all the insolvency risk in the chain, and doesn't have to pay for that insolvency risk either.

=== Lower preliminaries ===

If you imagine a supply chain with one main contractor, 5 sub-contractors and another 5 sub-sub-contractors (not a huge supply chain in itself), that requires that every month, 11 businesses are organising and making payments. The supply-chain compounding effect means that the Employer is paying for all 11, but through the main contract is also paying OH/P on the 5 sub-contractors and 2 x OH/P on the 5 sub-sub-contractors!

Not paying the various supply chain members for the administrative cost of making the payments and, instead, employing a Project Bank Account saves significantly on the resource and cost of the making of monthly payments.

=== No Employer payment overhead ===

While the main contracting / management contracting setup is effective at consolidating the payments for construction operations, the Employer is often left having to pay consultants, interior designers and even some specialist suppliers directly.

Through a project bank account, however, all of this payment can be consolidated so that the client's own payment function does not need to accommodate the needs of the construction project.

=== Lower risk of interest/disputes/suspension ===

Sometimes, for whatever reason, it simply isn't possible to pay on time. It may be that a second signatory is required and they are sick/on holiday/unavailable; or there might be a much more long-term issue - solvency, sanctions, asset freezes and the like - either way, late payment under a construction contract will generally mean that the Employer has to pay interest on the overdue sums.

In addition to this, in the event of a longer-term payment issue, late payment can entail suspension of the works (and all of the attendant costs), or even adjudication and expensive disputes. These can readily be avoided by use of a project bank account.

== 3. Simplification of payments ==

Construction payment cycles are, necessarily, quite complex. While on first blush, they appear straightforward, the proliferation of payment-related disputes, smash-and-grab adjudications and their enforcements, and the vernacular of payment certificates, pay less notices and retentions mean that unless the client is an experienced procurer of construction projects, any sort of payment obligations become all the more burdensome.

When the client is based overseas, or has their affairs structured through trusts, holding companies and/or family offices, this becomes more complicated still - governance requirements for signatories; trustee requirements for comfort and international money movement restrictions can all lead to an otherwise straightforward process becoming quite protracted.

To compound matters, in the event a payment is made late, the spectres of interest, suspension and adjudication also linger on the horizon.

PBA's make the process altogether smoother: The Contract Administrator issues a Payment Certificate. Unless a pay less notice has been brought to their attention, on the final date for payment, the project bank account will pay the invoice. It's that easy.

== 4. Mandatory in government projects ==

Project Bank Accounts have found favour in public procurement projects in the UK and overseas.

In England, since 2012, they have been an expected payment mechanism. The Government briefing paper set out the reasoning as follows:

Simple though the concept is, PBAs directly deliver against a range of the aims of the Government Construction Strategy. By addressing unfair payment practices, benefits will accrue to the whole supply team, by ensuring transparency of and certainty of payment. In particular, for the SMEs down the supply chain PBAs will protect their often very fine margins, obviate the need for unnecessary borrowing and can lead to a much more balanced trading environment, hence supporting growth. Cost savings accrue from supply chain members not having to chase payment or having to finance lengthy credit periods. PBAs eliminate payment disputes and the costs associated with them (which ultimately feed back into costs for the client). They also help the supply chain concentrate on the job in hand and reinforce or facilitate team working. Increased trust leads to greater collaboration, which in turn incentivises innovation.

National Highways has made Project Bank Accounts automatic for all of its NEC suppliers. According to Lloyd Biddell, head of cost intelligence at National Highways,

We have been using project bank accounts for over a decade and they have proven a great benefit to many of our suppliers. The current opt-in process can make the process daunting or confusing for our smallest suppliers, who are often the ones most likely to benefit from them. We are now making it even easier by automatically including them on project bank accounts unless they choose to opt out.

In Wales, for construction and infrastructure projects of £2m or more that are fully-, part- or grant-funded by the Welsh Government must use a Project Bank Account unless there are compelling reasons not to do so - where such compelling reasons are identified a decision report detailing those reasons must be completed and filed to allow for audit. Policy Notice WPPN-0321 provides:

2.5 Small to medium enterprises (SMEs) play critical roles in the delivery of public sector projects through sub-contracting arrangements. Access to finance and cash flow are vital to any business and no more so than smaller businesses with limited resources. It is therefore essential that public sector clients ensure fair and prompt payment, not only to our tier 1 contractors but throughout their supply chains when delivering public contracts. 2.5.1 PBAs are ring-fenced bank accounts with trust status that act solely as a mechanism for making payments. PBAs replace the traditional multi-layered payment terms between subsequent tiers in the supply chain with simultaneous payments to the lead contractor and supply chain partners. Traditional payment methods have resulted in sub-contractors commonly having to manage 60-90 day, or longer payment terms in some instances, whereas payments via a PBA typically take between 3-5 days from the deposit of money into the account following certification of the payment schedule. 2.5.2 PBAs have the added benefit of streamlining payment processes for clients, contractors and sub-contractors. Sub-contractors further benefit from PBAs as they alleviate the time and cost burden of chasing late payments and dispute resolution proceedings by ensuring timeliness and certainty of payment.

Scotland also introduced Project Bank Accounts in 2019 for any project with an estimated value over £2m for building projects or £5m for civil engineering projects.

== 5. Transparency & Compatibility ==

Project Bank Accounts promote compliance with the principles of the Prompt Payment Code - payment is both more transparent and it is far easier to manage actual payment timescales.

The final benefit of Project Bank Accounts is that they are compatible with any kind of construction contract - they are simply a payment service which helps the client in delivering the physical payment required.

== Conclusion ==

It's clear to see why clients prefer Project Bank Accounts - and although there are not 100's of [https://www.dospay.co.uk/articles/uk-project-bank-account-providers Project Bank Account Suppliers], there are plenty of us and the exercise of opening and running one is much less complicated than you may have been led to believe

Security for Expenses Deposit Providers (2025

2025-01-21T09:52:11Z

Peter Hillyard: Created page with "If you need to deposit Security for Expenses under the Party Wall Act while you carry out construction works, you've come to the right place - we round up the options for you to ..."