Bankers' Bunkers - the rights of Neighbours

As published in Estates Gazette, 4th January 2014.

Helena Davies and Stephen Bickford-Smith examine the lessons to be learnt from a recent case involving works to a party wall and construction of a new basement.

Faced with soaring land costs, many wealthy Londoners are extending their houses by excavating new basements, sometimes several levels deep. Twelve months ago, the Guardian agonised that "a new billionaires' craze for building elaborate subterranean extensions is making Swiss cheese of London's poshest streets – but at what cost?"(9th November 2012).

Stories of the problems caused to neighbours are frequent, and include:

  • Noise and vibration while excavations are carried on and the new sub-structure built;
  • Dust and grit while several hundred tons of soil are carried out of the property by conveyors or manually, and carted away in heavy trucks;
  • General disturbance from building works; and
  • Risk of structural damage from subsidence and vibration.

Planning controls do not apply to works which do not affect external appearance although the Royal Borough of Kensington and Chelsea has published planning guidance specifically dealing with subterranean development.

Planning law aside, how can neighbours protect their houses and what claims are available for noise, dust and subsidence?

There are two avenues of redress. The Party Wall etc Act 1996 (the “PWA”) was designed to protect neighbours where works to a party wall are carried out, or where a basement is being excavated. This should be the first port of call for a developer (“building owner”) and its adjoining neighbours (“adjoining owners”). It applies where basements below the existing foundations of the adjoining owners are to be created and also to significant works to the party walls above ground level.

The important provisions are:

  • Section 2: allows a building owner to carry out works to a party wall. Section 2(2) contains an (exhaustive) list of 14 permitted operations which allow everything including complete rebuilding. One particular item covered is the right to cut in to a party structure for any purpose (section 2(2)(f)). However, before any such works are commenced the building owner must serve a party structure notice on each adjoining owner.
  • Assuming the adjoining owner served with a notice does not agree to the works, each party appoints a surveyor who together decide how the works should be done, by way of “award” under section 10. Either party or their surveyor may refer matters in dispute to a third surveyor to make an award. Awards may be appealed to the county court.
  • Section 6 requires an award where the building owner excavates below the level of the foundations of nearby buildings within specified distances. This will normally catch the construction of a new basement.
  • Section 7(1) obliges the building owner not to exercise his rights under the PWA in a way which gives rise to unnecessary inconvenience to adjoining owners, and section 7(2) obliges him to compensate them for any loss of damage which may result to any of them by reason of any work executed in pursuance of this Act.

The other avenue of claim is under the general law of nuisance. This covers noise, vibration and dust, subject to a defence of “best practicable means” and also physical damage, where this defence does not apply.

Typically, basement projects involve not only works subject to the PWA but major operations elsewhere on the site, including pile-driving, excavation, and building. Where these other works cause disturbance or damage, the remedy lies in a common law claim. Thus to obtain full compensation it may be necessary to seek compensation under the PWA and also make a common law claim.

Kelliher v Ash Estates Ltd and Normand Developments Ltd [2013]

The application and inter-action of these remedies was examined recently in the Central London County Court by HH Judge Bailey in the case of Eileen Kelliher v Ash Estates Ltd and Normand Developments Ltd, (Judgment 24th July 2013).

In 2008, Ms Kelliher had just about completed a major renovation of her Victorian townhouse in W2 (“No.19”). This work had been substantial and included replastering of all internal walls. Towards the end of 2008, Ms Kelliher was served notice under the PWA informing her that work was about to start on the adjoining property (“No.21”), which was to include digging down several metres to create a new basement and adding an extra storey above in a new mansard roof.

Work at No.21 started in January 2009 with the removal of internal plaster from the party wall, and demolition of part of a chimney breast built into it. This was carried out using electric drills fitted with chisels. The noise and vibration alarmed builders at No.19 who were undertaking snagging work. There was no award in place authorising these works under section 2 of the PWA.

Excavations started at No.21 in early 2009 again without any award under section 6. Unfortunately the builders employed by the developer were inadequately supervised and failed to follow the engineer’s methodology for underpinning No.21. The result was that the foundations of No 19 were left unsupported, leading to a near disaster when No.19 suffered a structural shift and a series of cracks opened up, one through the fascia of the building, audible as it occurred and visible both externally and internally.

Following the threat by Ms Kelliher of an interim injunction, a party wall award was agreed. However, this was based on the original design for the basement with which the builders had not complied. As such, work to the basement was stopped for 12 weeks while the foundations were redesigned. The disturbance from excavation thus occurred in the Summer, when Ms Kelliher was at home, trying to recover from a serious illness. Not only were there weeks of noise and dust ahead for her but she discovered that the new plaster on her side of the party wall had become debonded, eventually having to be replaced. There was also cracking, leading to the front door becoming un-openable. Additionally, various other terms of the original award were breached, such as the work hours permitted at No.21.

Ms Kelliher repaired the damage and sought an award under the PWA for compensation under section 7. Many items of damage and loss of amenity were uncontroversial, and covered in an agreed addendum award, by the parties’ surveyors. However the developer’s surveyor could not agree claims for the replastering, or several other items and the dispute was referred to a third surveyor, as envisaged by section 10(11) of the PWA.

Both party-appointed surveyors made full written submissions, including in the developer’s case referring to a previous “without prejudice” offer for which he was heavily criticised in the judgment.

The third surveyor rejected the claim for replastering on the ground that the works to the party wall had not been shown to have caused the damage. He also rejected all the claims apart from a claim for a replacement front door. Ms Kelliher appealed.

The developer in resisting the appeal made two points in particular. First, it denied that any damage or disturbance Ms Kelliher had suffered was caused by works under the PWA. Secondly, it contended that removal of plaster from the inside wall of No 21 was not work covered by the PWA at all. Faced with this, Ms Kelliher commenced proceedings in common law, since she believed that even if the works under the PWA were not responsible, the many items of disturbance and damage could be shown to have been caused by works elsewhere at No 21. She joined the company managing the project as second defendant. These proceedings were consolidated with the appeal.

HH Judge Bailey found that the debonding of the plaster had been caused by the developer’s works and allowed the PWA appeal against the third surveyor’s decision.

On the question of whether the removal of the plaster could fall within section 2(2)(f) of the PWA, the judge held that the answer depended on how the work was done. If the plaster was in poor condition and could be removed easily it would not be within the PWA. However, where it is well adhered, and requires percussive machinery to remove it, the PWA is engaged; “As soon as an operative, holding an electric or other Bosch tool whether with a drill end or a spade end, so attacks the plaster that he goes into even the very edge of the brickwork, comprising the party wall, he is then in a position where as I see it he is cutting in to a party structure, for any purpose and in this of course the removal of plaster, which is covered by section 2(2)(f) of the Act”.

On the loss of amenity claim, HH Judge Bailey held that under section 7(1) of the PWA the adjoining owner has to put up with normal disturbance from a construction site. He accepted that the inconvenience suffered was longer than necessary given the 12 week delay and the resultant loss of the use of Ms Kelliher’s garden during the summer.

Ms Kelliher sought compensation for loss of earnings, on the basis that the disturbance and 12 week delay in turn delayed her convalescence following her illness. The judge held that the claim was in principle maintainable under section 7(2) but held that it was not established on the facts.

The judge dealt with various other elements of the claim in turn and rejected a claim for general damages based on various breaches of the original award, which he described as “numerous”. In relation to the planning breaches, he held that “there is no claim for an adjoining occupier for general damages simply because the builder next door fails to comply with all appropriate regulations”.

Lessons from the case

 The case is of interest for a number of reasons:

  1. It is clear that removal of plaster from the party wall may engage the PWA depending on the degree of invasiveness of the method of removal used. Developers will need to consider this before “soft-stripping” buildings.
  1. Claims for loss of earnings can be pursued in principle under section 7(2). This may be important where the adjoining owner works from home, as is increasingly common.
  1. More generally, the absence of any direct sanction for breach of the provisions of the PWA is a serious gap in the protection the Act is supposed to offer to adjoining owners. Work under the PWA was carried on without an award having been made to authorise it. This was only stopped when an injunction was threatened. Further, Ms Kelliher was denied compensation for many breaches of the original award designed to protect her against noise, dust and working during unsocial hours.
  1. Party wall surveyors should be reminded of the special status of “without prejudice” correspondence and its inclusion in submissions to a third surveyor, which could invalidate the referral.
  1. Where there is genuine doubt as to whether a claim for disturbance and damage results from work under the PWA or work elsewhere on the site, it may be prudent to make a claim against the developer and any project management company in tort concurrent with an appeal under the PWA.

Stephen Bickford-Smith represented the Claimant, instructed byHelena Davies, director at DWF LLP.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Helena Davies

Senior Associate

I specialise in real estate litigation, having over 14 years’ experience advising a broad range of clients on property disputes.