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
Grouting refers to the injection of materials into a soil or rock formation to change its physical characteristics.
Part of Designing Buildings Wiki, BREEAM Wiki will advance knowledge sharing for the BRE family of sustainability tools.
Iron, glass and wood underfoot
From the decorative to the utilitarian, and from the photographed to the forgotten.
New BRE book considers the progression from project-based knowledge creation to whole-life urban knowledge management.
This CIOB article explores the concept of value in building design and construction.
BREEAM and Measurabl announce integration to improve the financial performance of commercial real estate.
Rogers Stirk Harbour + Partners' release new images of soon-to-open 3WTC tower in New York.
A document can be called a bond or a guarantee. Does the name matter and what is the difference between them?
New briefing note is launched focusing on increasing knowledge of housing that promotes health and wellbeing.
Arbitration is a private, contractual form of dispute resolution used in the construction industry.
The European Parliament has approved a revised Energy Performance of Buildings directive.
One in six MPs supports the ring-fencing of retentions as proposed in the 'Aldous Bill'.