Calculating compensation for property damage
Where works carried out on one property damage another, should compensation be payable on the basis of reinstatement costs or diminution in value? The High Court tackled that issue recently in the case of Lea Valley Developments Limited v Derbyshire.
The owner of a house had obtained an award under the Party Wall etc. Act 1996 that authorised a building project, including excavation works. The award required the owner to make good any decorative or structural damage caused to a neighbouring property, a block of flats, or to make payment in lieu.
The works caused damage to the block that was agreed to be so serious that it was beyond economic repair. The costs of demolishing and rebuilding the block were estimated at between £1 million and £2 million.
However, the house owner said that the diminution in the block’s value arising from the damage was between £500,000 and £1 million. The owners of both properties sought declarations as to the correct basis on which compensation was payable.
The Court rejected the owner of the block’s arguments that, on a true reading of the Act and the terms of the party wall award, there was no issue to be tried and that damages had to be calculated on a reinstatement basis. However, it also refused to grant the owner of the house a declaration that, as a matter of common law, the diminution in value basis necessarily prevailed.
The issue of whether reinstatement or diminution in value represented the correct approach to the assessment of damages was highly fact sensitive and dependent on a wide range of factors. There was no rule of law that prohibited awards on either basis or that required one to prevail over the other. It was thus inappropriate to resolve the issue without hearing detailed factual evidence.
[edit] Find out more
[edit] Related articles on Designing Buildings Wiki
Featured articles and news
Reform of the fire engineering profession
Fire Engineers Advisory Panel: Authoritative Statement, reactions and next steps.
Restoration and renewal of the Palace of Westminster
A complex project of cultural significance from full decant to EMI, opportunities and a potential a way forward.
Apprenticeships and the responsibility we share
Perspectives from the CIOB President as National Apprentice Week comes to a close.
The first line of defence against rain, wind and snow.
Building Safety recap January, 2026
What we missed at the end of last year, and at the start of this...
National Apprenticeship Week 2026, 9-15 Feb
Shining a light on the positive impacts for businesses, their apprentices and the wider economy alike.
Applications and benefits of acoustic flooring
From commercial to retail.
From solid to sprung and ribbed to raised.
Strengthening industry collaboration in Hong Kong
Hong Kong Institute of Construction and The Chartered Institute of Building sign Memorandum of Understanding.
A detailed description from the experts at Cornish Lime.
IHBC planning for growth with corporate plan development
Grow with the Institute by volunteering and CP25 consultation.
Connecting ambition and action for designers and specifiers.
Electrical skills gap deepens as apprenticeship starts fall despite surging demand says ECA.
Built environment bodies deepen joint action on EDI
B.E.Inclusive initiative agree next phase of joint equity, diversity and inclusion (EDI) action plan.
Recognising culture as key to sustainable economic growth
Creative UK Provocation paper: Culture as Growth Infrastructure.
Futurebuild and UK Construction Week London Unite
Creating the UK’s Built Environment Super Event and over 25 other key partnerships.
Welsh and Scottish 2026 elections
Manifestos for the built environment for upcoming same May day elections.
Advancing BIM education with a competency framework
“We don’t need people who can just draw in 3D. We need people who can think in data.”