Underground and over-complicated: dealing with basements

Rob French considers how basement culture will shape the future of party wall practice – and likely lead to new case law

The growing trend of basement excavations in affluent areas has presented new challenges to party wall surveyors. As a result of this culture, surveyors are now commonly needing to deal with additional difficulties where basements are excavated  adjacent  to existing basements. While seasoned party wall surveyors are used to dealing with the issues associated with excavating isolated basements, issues related  to excavating adjacent to existing basements can raise unknowns and increase tensions between owners. Such projects can place surveyors  in  a  jurisdictional  and legal minefield, owing to the numerous grey areas around this subject. There is a lack of clarity regarding adjacent basement excavations and a need for the courts to set legal precedents moving forward.

Enclosure costs v trimming overspill/trespass

On the one hand, surveyors may need to address enclosure costs under section 11(11) of the Party Wall etc Act 1996 due to a party wall having been underpinned by the adjoining owner when they previously excavated a basement. This basically means that, if a party desirous of excavating a basement makes use of a section of basement wall/underpins installed at full expense by their neighbour, their neighbor  can claim back half the cost of those works once the enclosure/reliance on their works is realised.

On the other hand, when actually excavating a basement adjacent to an existing basement, it can be found that the underpins, and potentially even the reinforcement within the underpins, have over- spilled, creating a counter claim for trespass and the cost of cutting back the concrete. This will inevitably become a common contentious issue as, while developers of properties adjacent  to existing basements wish to simplify matters by undertaking a set-off negotiation, the party wall and legal position is unfortunately not quite so simple. Only the tribunal of surveyors who agreed the original award for the now-adjoining owner have the jurisdiction to award costs for trespassing underpinning and these surveyors may not be contactable. If the award cannot be found, or it is unknown if it existed, then it is difficult  to  ascertain  to  what extent such foundations were permitted on the land of the now-building owner and therefore proving a trespass may be problematic.

Further complications may be experienced if the original owner who undertook the basement  works which caused the trespass has since moved, as they will need to be tracked down in order to pursue any claim against them. A trespass claim can only be brought against the party that caused the trespass, not a subsequent owner of the building. It will then of course be difficult to justify to such owners why they are still held responsible for the cost of the trespass even though they have sold the asset. If they are not easily convinced of their responsibility to settle such a claim then the building owner will need to consider whether or not they need to progress a common law claim. Consideration also needs to be given as to whether or not  a claim against the original contractor of the basement scheme would be successful. The existing tribunal of surveyors for the new basement project can of course award for the trespass to be trimmed, but it is then difficult to explain to the existing building owner why the associated costs cannot be dealt with under their jurisdiction.

Surveyors are sometimes confused as to the relevance of the limitation period for such a trespass claim. However, currently legal authorities indicate that the limitation period does not commence until a trespass is discovered and so is rarely relevant in these circumstances. Given these complications, and to avoid legal remedies and costs, it is common practice for the surveyors to be asked to facilitate direct negotiations between the owners to agree a set-off between the two opposing claims and record this in a separate agreement.  In many cases, however, the owners have fallen out, so facilitating such an agreement can be very difficult, if not impossible. This  is  a  future  issue  which surveyors need to get to grips with as an increasing number of basements are excavated adjacent to existing basements. As some contractors of yesteryear may have been a little complacent in their adoption of protection measures to prevent trespass, these are inevitably going to be matters which overspill into the courts  soon.

Security for expenses

Security for expenses relates to the right of the adjoining owner, under section 12(1)  of the 1996  Act, to request that the building owner places a sum of money in an escrow account (or in any other means the parties agree) for the adjoining owner to make use of to safeguard the works in the event of abandonment. In some  situations  additional sums are also held to cover the cost of repairs to the adjoining owners’ property in the event that damage is caused by the neighbouring works. There is a considerable difference in opinion as to what represents a reasonable basis for calculating such sums. Some believe that only a minimal sum is needed to temporarily make safe abandoned works, whereas others believe that sums should cover the full reconstruction cost of an adjoining property to protect against the highly unlikely event of total collapse.

With so many adjacent basement projects going ahead, the risk of damage to adjoining owners’ assets  is  a growing concern and horror stories are well reported; however, serious   damage

is rare. As you need to be a relatively wealthy individual or company to consider a basement scheme, it stands to reason  that  some adjoining owners may also have the financial means to appeal if they do not believe that the security for expenses sum awarded protects the full extent of their risk. Some adjoining owners will appeal out of spite, but most will do so out of a genuine misunderstanding of the risks posed to their property. Security for expenses is currently a hot  topic; especially with the perceived high risks related to basement projects. Security for expenses matters are no stranger to the courts and  it  seems  inevitable that the two will be reacquainted soon.

Reinstatement v diminution in value

The litigation in Lee Valley Developments Ltd v Thomas William Derbyshire [2017] EWHC 1353 (TCC) raised questions regarding compensation calculations where an adjoining owner’s property is an investment property which has been damaged by a building owner’s works.

Specifically, these cases raise the question: should the section 7(2) claim be calculated on the basis of the legal principles of “reinstatement” or “diminution in value”? Common sense dictates that residential properties owned as a residence must be reinstated, but it is a valid consideration that, where an adjacent owner’s property is an investment, the standard legal principles of diminution in value may apply. Ultimately, this matter was settled out of court with the help of a third surveyor award, but it has highlighted a contentious area of party wall law which will inevitably be picked up by another building owner, or their insurer, looking to  minimize  an adjoining owner’s section 7(2) claim for compensation.

Do piles constitute “a wall”?

Where basements are proposed on the line of junction, access rights are a common point of contention. It is only a matter of time before it becomes common practice among developers, following the service of a line of junction notice, to argue that piles are “a wall” in the  eyes of the 1996 Act, thus  attracting  access  rights.

A diaphragm wall is highly likely to be defined as “a wall” under the 1996 Act, but many believe that it is difficult  to argue  that  a secant piled structure is “a wall”, as such a structure would not form a continuous solid face on the line of junction. This will therefore mean that a contiguous piled wall would be even more difficult to define as “a wall”. Even if the principles are agreed, there are then other considerations with regard to pile verticality and future trespassing.  Court cases are no doubt on the horizon to decide which subterranean structures constitute a wall under the 1996 Act.

Inconvenience v unnecessary inconvenience

Generally it is accepted that causing inconvenience to an adjoining owner, when undertaking a basement scheme, can be awarded by surveyors, as long as the inconvenience is necessary and reasonable mitigation methods have been suitably considered. Unnecessary inconvenience is not permitted and cannot be authorised by the surveyors. It is however naïve to think that the differences between “inconvenience” and “unnecessary inconvenience” are well defined or easily identifiable. The word “unnecessary” is ambiguous and ambiguity, as we know, leads to litigation.

In practice, building owners’ works cannot be vetoed just because the adjoining owner considers such works would cause unnecessary inconvenience. The onus is on the building owner to prove that the inconvenience caused is necessary to achieve their scheme and the adjoining owner will then look to prove that there are alternative means of working which would cause less inconvenience. As always, ultimately this matter will boil down to cost and the question likely to hit the courts is: to what expense is it reasonable to put the building owner to mitigate any/all inconvenience to the adjoining owner? Those reasoned individuals  among us will rightly consider this to be a common sense balancing act based on the specific circumstances, but common sense can sometimes be lacking when tensions are high, leading to court disputes.

How much damage is it reasonable to risk?

A further issue relates to the interpretation of the right (or not) of the building owner to cause damage to the adjoining owner’s property in pursuance of their works. Many adjoining owners understandably cannot come to terms with the fact that the building owner has such a right. Currently, general consensus among surveyors is that causing category-one damage, as defined by CIRIA Report C580 on embedded retaining walls, is acceptable but category-two is not. If a building owner has legitimately done everything possible to limit the extent of damage likely to the adjoining owner’s property, yet category- two damage is still predicted, can the damage then by its very nature be labelled “necessary” as opposed to “unnecessary”? The threshold for unnecessary inconvenience is another matter which the courts are inevitably going to have to decide soon.

It  will be interesting to see how these matters play out over the coming years; and play out they certainly shall. If we have learnt anything from the basement projects of the past decade it is that, while litigation is expensive, there are plenty willing to pick up the bill.

Rob French BSC (Hons) MSc (Proj Man) FRICS is an equity partner at Delva Patman Redler LLP