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
ECA Industry Awards 2024 shortlist revealed
22 leading businesses from across the electrotechnical and engineering services sector.
Government unveils Skills England strategy
Skills England to transform opportunities and drive growth.
New Government Hub for York Given Planning Green Light
For up to 2,600 civil servants, due for completion by 2028.
Construction Skills Certification Scheme cards
July update on Professionally Qualified and Academically Qualified Person Cards.
BSRIA Briefing 2024, November 22
Sustainable Futures: Redefining Retrofit for Net Zero Living.
The CLC on driving competency in the retrofit sector
Previously published roadmap on skills for net zero.
The first labour government King's speech in fifteen years
Construction industry reactions, support and some concern.
CIOB Retrofit of Buildings Technical Information Sheet
What retrofit is, the approach to be taken and processes to be followed.
Adapting Historic Buildings for Energy and Carbon Efficiency
Historic England advice note 18, free download published.
10 retrofit projects revisited 10 years after completion.
Information orders, building liability orders and SPVs
Key BSA terms and how they impact special purpose vehicles.
Listed despite problems with its design.
Zen and the art of cycling exploration.
Design Council Homes Taskforce launched
To support government 1.5 million homes target within UK climate commitments.