Party Wall Act Costs – Protecting the building owner from the Highwayman
One of the most worrying aspects of entering the Party Wall Act 1996 (Act) arena is the uncertainty surrounding fees, or as they are referred to within the Act -‘costs’.
If you are fortunate enough ( or some might say lucky enough) to have at your side a competent party wall surveyor, and one with a moral compass, the chances are you will derive a certain degree of protection. However, there is still no guarantee you will not need to set aside a considerable sum of money to cover the cost of becoming trapped within the Act. This applies equally to both building owner and adjoining owner, and one must not forget that if an adjoining owner’s surveyor does not recover all of his costs from the building owner, there is every possibility the adjoining owner may be left to meet the remaining liability.
The problem of high, unreasonable and unpredictable costs is caused, in part, by a piece of malfunctioning legislation, and patly as a result of certain unconscionable conduct on the part of some of those so called ‘experts’ working within and purporting to discharge their statutory duties under the Act.
Philip Antino, a party wall surveyor, writing in 2011 ( P Antino, Dealing with Unreasonable Costs (Faculty of Party Wall Surveyors’ Newsletter: ‘Party Wall Surveyor‟, January 2011) issued the following warning:
‘……the peculiarity of the Act is such that the appointed surveyor does not have to be qualified or trained in party wall matters or indeed affiliated to any professional body. Consequently, they are therefore not bound by the code of conduct or ethics of any professional body. Dealing with these types of surveyors ………………that adopt these procedures is very frustrating. Their approach is detrimental to principles of the Act and makes the whole process extremely difficult to manage.
So what does the Act say on costs?
The relevant parts can be found in sub-sections of section 10 of the Act:-
Sub-section (12): An award may determine… (c) any other matter arising out of or incidental to the dispute including the costs of making the award
Sub-section (13): The reasonable costs incurred in – (a) making or obtaining an award under this section… shall be paid by such of the parties as the surveyor or surveyors making the award determine
This means the costs must have been incurred in connection with the making and production of the award, and must also be reasonable in terms of relevance and the amount of fee sought.
What does the cost of making or obtaining an award include?
According to leading Party Wall Barrister Nick Isaac (Party Wall Surveyors and their “reasonable” fees – published January 15, 2018):
‘….all of the to-ing and fro-ing which goes into producing the document entitled “award” which the surveyors eventually produce – generally speaking that is almost all of the surveyors’ time between a deemed dispute arising 14 days after service of a notice under section 3 or section 6(5), and the award itself being signed. It will include communicating with the other surveyor, obtaining and checking the relevant information for the making of the award, and the time spent actually drafting the award, or revising it.
What is not included is the cost of actual or contemplated litigation.
This was recognised by Etherton J, as he was then, when delivering the only judgment of the Court of Appeal in Reeves v Beatrice Blake  EWCA Civ 6111:
‘The purpose of the 1996 Act is to provide a mechanism for dispute resolution which avoids recourse to the courts. A power of the appointed surveyors under the 1996 Act to make provision for costs incurred for the purpose of actual or contemplated litigation in court would be inconsistent with that statutory objective. Such litigation, resulting from noncompliance with the dispute resolution mechanism, falls entirely outside the statutory dispute resolution framework.”
The view was reaffirmed in Reeves v Blake  1 WLR 1.
Nor does it include the cost of enforcing an Award, as was recognised by HH Judge Bailey in Reeves v Young Antino (C20CL109 Approved Judgment(1). Upon being required to consider the enforcement costs of Philip Antino the judge found:
‘It seems to me that the legal costs of pursuing a sum for costs awarded by a surveyor, or surveyors, to himself or themselves, in an award is not properly considered to be a matter arising out of or incidental to the dispute. On the contrary it is a matter which arises outside the 1996 Act. All courts of law govern their own procedures, including any incidence of costs arising out of proceedings before the court. The fact that a party wall surveyor has to go to court to enforce his award leaves him in no worse a position than any other litigant. He is entitled to claim such costs as are available to him in the relevant court’s procedures. It is possible for a surveyor to enforce his award either in a Magistrates’ Court or in a County Court and he may make his choice and obtain such costs as are available in each of those different courts. Therefore in including the passage which I have put in italics it seems to me that Mr Antino is going beyond that which he is entitled to do under the 1996 Act’.
So which items of work are covered? Is all communication between the surveyors post appointment covered per se? I would argue no it is not. The purpose of each letter, telephone call, or other exchange should be examined. For example, if the surveyor acting for the adjoining owner has written numerous letters unnecessarily arguing each and every point and has failed to focus squarely on discharging his or her statutory duty, should the owner be responsible for those fees? Moreover what is the position where unnecessary work has been generated for no reason other than deliberate procrastination, or the constant shifting of position, designed to increase that surveyor’s fee entitlement?
More often than not a party wall dispute will involve work that falls outside of the jurisdiction of the Act, but which an unscrupulous surveyor may attempt to include as part of his or her party wall costs. For example, the time spent on addressing and responding to common law issues, such as encroachment. There is nothing of course preventing the surveyor from recovering these fees from his or her appointing owner, but without making sure cost claims are considered closely, there exists a risk that a building owner may be charged for this non party wall work. Added to this is the problem the mechanics of the Act leave it to the surveyors involved to agree fees between themselves. This can often leave the home owner excluded, and left only with the option of an appeal to the County Court.
The need to protect the building owner was recognised by Phillip Antino in his article:
‘The appointed surveyors‘ duty is to ensure that the procedures are applied properly and this would include ensuring that a building owner is not put to any unreasonable expense, either as a consequence of unethical ruthless strategies adopted by the adjoining owner‘s surveyor, or indeed as a consequence of any false claims made by an adjoining owner’.
Mr Antino drawing on his wealth of experience, clearly recognised the problem faced by the building owner when faced with a demand for unreasonable fees, and of the need for surveyors, particularly third party surveyors ,to be alert to unreasonable practices of this type.
Tied in with the need for costs to be tied into or arising out of the dispute, is the question of reasonableness. Nick Isaac in his article suggests the assessment of fees raised by an adjoining owner’s surveyor should not be regarded as routine, but should comprise instead of a more considered approach, taking into account some fundamental principles. He suggests the following questions would be asked when looking at a breakdown of costs:
Firstly, was it really necessary for that piece of work to be undertaken? For example, if ten letters were sent when only two were actually necessary, then only the fee for those two letters should be allowed.
Secondly, was the time spent reasonable having regard to the nature of the dispute and the skill and experience of the surveyor in question. For example, if the only issues between the parties comprised of some minor damage occurring during the performance of notifiable works, should an adjoining owner’s surveyor be able to claim, without challenge, a large number of hours for investigating, reporting, negotiating and producing an award?
This has particularly relevance when faced with a surveyor who has a very high hourly rate and who records every minute of time spent working.
This was one of the other issues His Honour Judge Bailey was asked to determine in Reeve v Youngs and Antino.
Commenting on the reasonableness of Mr Antino’s charging rate of £350, and the time he spent as one of the appointed surveyors, the Judge said:
‘Fees involve both hourly rate and hours spent. A high hourly rate, if it is to be reasonable, will be justified only where the surveyor has and demonstrates particular expertise or exercises such efficiency that he carries out more work than a surveyor for whom a lower hourly rate is appropriate. In comparison with the charges made by surveyors in many of the awards that have been before this court £350 per hour is a very high rate. Casting one’s eye down the breakdown of Mr Antino’s fees one can well envisage he would have very great difficulty indeed in persuading a court that the hours spent at this hourly rate was anything approaching reasonable. But although I have highlighted the difficulty inherent in setting out an hourly rate in a party wall award I do not consider that I can properly go so far as to say (as I have been invited to do) that hourly rates should not be set by surveyors or that any particular hourly rate, subject, of course, to ludicrously high rates (and £350 ph while very high in comparison with the market as a whole cannot be stated to be ludicrously high), must necessarily be invalid within the context of a party wall award’.
This suggests the following :
- It not proper for an Award to record an hourly rate.
- A surveyor can essentially charge his or her time out at any rate providing it is not ‘ludicrously high’.
- There is a reasonable expectation that where there is a high hourly rate, the time spent by that surveyor should be significantly less than that of a less experienced surveyor with a lower hourly rate. The cost of research is a good example of time that should not be charged to a building owner by an experienced surveyor.
- The third principle and perhaps the most important one is proportionality.
As Nick Isaac points out, this element has for a longtime spent a very prominent role in the assessment and determination of fees claimed in litigation. He argues there is no reason for this to be any different in the context of assessing the reasonableness or otherwise of a surveyor’s fee. He explains: ‘This is a concept which is universal in consideration of fee assessment in civil litigation, but which appears generally little-known or understood amongst surveyors. A cynic might argue that this is because proportionality can have a very significantly depressing effect on levels of recoverable fees. Nonetheless, I would suggest that proportionality is very much at the centre of any consideration of reasonableness in terms of fees. In essence, and borrowing from the CPR definition of the same, the person determining the reasonableness of fees has to consider whether the amount of fees which are sought to be awarded bear a reasonable relationship to: (a) the cost of notifiable works which are the subject of the award, (b) the complexity of the dispute resolved by the award, and (c) any additional work generated by the conduct of the paying party.’
Some may say this is nothing more than a statement of common sense. How could a surveyor reasonably raise a fee of, say £3,000 for representing an adjoining owner in a dispute where the notifiable works to be recorded in an award only amount to say £200? Complexity I accept, may be a factor, but as we all know, as indeed Mr Antino hints at in his article, there are certain surveyors who can make even the most straightforward of disputes complicated and protracted.
One must keep firmly in mind the purpose of the Act. The Act was designed to prevent and resolve disputes. It was never intended to provide unscrupulous surveyors with a vehicle to ‘cost build’ at the expense of the paying owner. Nick Isaac in his article calls on the profession and regulators do more to address this problem:
‘Although the majority of party wall surveyors, objectively viewed, approach the assessment of reasonable fees in a sensible way, there are unfortunately a few surveyors who treat the Act as a licence to print money. I have expressed the view previously, and do so again, that the surveyor’s profession as a whole, or certainly those who practice in the arena of party walls, should be very concerned at the damage which such surveyors are undoubtedly doing to the reputation of the profession as a whole. If professional bodies do not take appropriate steps to regulate such matters, the courts and, ultimately, parliament, may do so’.
So what action can be taken when faced with an unreasonable cost demand?
To begin with, there is nothing to prevent you from reminding the surveyor of his or her statutory duty.
Each surveyor owes an individual duty of impartiality to each of the appointing parties and that this must take priority to the interests of their own appointing client. There is also an overlapping of diligence in administering the provisions of the legislation which would be owed to both parties equally.
It is suggested (‘Impartiality and the Party Wall Surveyor ‘ – Chynoweth, P):
‘…a failure by surveyors to deal promptly with matters arising under the legislation, possibly even in response to express instructions from their appointing owner, would therefore result in a potential liability to the other appointing owner’.
These incidents are not isolated. They are increasing in number and, as Nick Isaac alludes too, there is a need for surveyors to ‘police’ their colleagues more closely and to refer rogue surveyors to their regulator. There is a collective responsibility to do more to stamp out this fast growing epidemic.
The next option is to consider the ex parte procedure. Mr Antino is an advocate of this process, and in his article he suggests that a building owner’s surveyor faced with a unreasonable fee demand should simply acknowledge the fee as unreasonable, and to then, after giving appropriate notice, proceed to draw up and serve an award ex parte.
The enabling parts of the Act are sections 10(6) and 10(7) which provide :
Section 10(6) of the Act states: “If a surveyor […] refuses to act effectively, the surveyor of the other party may proceed to act ex parte and anything so done by him shall be as effectual as if he has been an agreed surveyor”.
Section 10(7) states: “If a surveyor […] neglects to act effectively for a period of ten days beginning with the day on which either party or the surveyor of the other party serves a request on him, the surveyor of the other party may proceed to act ex parte in respect of the subject matter of the request and anything so done by him shall be as effectual as if he had been an agreed surveyor”
The authority of Frances Holland School v Wassef  makes it clear that to rely on this part of the Act there is a strict need to for evidence to be recorded within the ex parte award to illustrate either a refusal to act effectively or a failure to act effectively within 10 days of a request. This will include evidence to show that whatever action may have been taken by the other surveyor has not been effective.
There is an argument that by proceeding in this way that the surveyor chasing the unreasonable fee could be left high and dry, at least in for far as making a recovery from the building owner.
In an article ‘Going It Alone: ex parte Awards’ James McAllister explains the risk:
‘Taking matters further, it could be submitted that the fees of the surveyor refusing or neglecting to act need not even be entertained by the ex parte surveyor since their services (and naturally their appointment) will have been summarily discharged with the service of the ex parte award; this example, of course, assumes the ex parte award covers all the points the surveyors were appointed to settle. Accordingly, the non-participating surveyor will no longer exist as a statutory member of the tribunal and fees need not, therefore, be awarded. If the supplanted surveyor wishes to pursue his fees with the appointing party directly, then that is their prerogative, but this could only be enforced contractually, if indeed a contract exists’.
Mr Antino in his article also warns that in adopting this ex parte procedure there is still a need to:
‘[d]demonstrate reasonableness at all times; again, to protect your owner against any claims for costs [and] [a]pply the Act procedures with impartiality; you should then achieve the same objective, which is to ensure that the building owner only pays reasonable costs’.
Finally, there is a need to consider the role of the Third Surveyor.
It is open to the parties to agree an award on the agreed issues and to then refer the issue of fees to the Third Surveyor for determination. There are costs risk associated with this referral for the losing party, and therefore one must always take a pragmatic approach when considering whether the fee is reasonable or not.
The building owner has to trust the Third Surveyor to understand what is involved in the assessment, of what is and what is not reasonable, and does not simply proceed to rubber stamp the fees.
This will involve a detailed look at the time spent, the purpose and relevance of each item of work and reference to the level and expertise of the surveyor in question. The conduct of the surveyor also needs to be considered. Nick Issac in his article articulates this argument well when he says:
‘When it comes to considering the reasonableness of fees, it is incumbent upon the person assessing that reasonableness to analyse who is responsible for the continuation or escalation of any dispute. Overly aggressive or adversarial correspondence is often, although not always, a good indicator that a surveyor is ramping up disputes rather than seeking to resolve them. Appointing owners should not be expected to foot the bill for party wall surveyors feuding about their pet party wall arguments.
Surveyors should be particularly alive to the fact that assertions of unreasonable conduct by one party or surveyor against the other, are sometimes made by the most unreasonable person involved. This is a judgment much easier for a truly independent person to reach, but an objective analysis of correspondence is generally a good starting point in determining such matters’.
One tactic open to the challenging party is to make an offer to pay a reasonable fee and to produce this offer prior to agreeing to the Third Surveyor referral. Once made, and assuming it not agreed, ask the Third Surveyor to reserve making a costs award at the end of his assessment until details of the the rejected offer can be communicated. If the assessed fees are lower than the offer then there would be good argument that the cost of the referral should be visited upon the adjoining owner. This may make the adjoining owner surveyor think twice about making the referral.
No building owner acting reasonably and in accordance with the Act should be required to pay to the adjoining owner’s surveyor anything other than a reasonable fee. If there is evidence of mischief on the part of the adjoining owner’s neighbour then there exists a duty on the party wall community to make sure the conduct is exposed and stamped upon. To allow unfair practice of this type to continue is unprofessional, unethical and possibly criminal.
There is really no better way to conclude than to record the wise words of warning made by James Jackson FFPWS in his editorial (Faculty of Party Wall Surveyors’ Newsletter: ‘Party Wall Surveyor‟, January 2011):
‘If the image of a party wall surveyor is that of a person charging exorbitant fees whilst offering a basic service and it seems demonstrating little in the way of skill and expertise let alone advice and guidance, it is probable that he may be considered as the twenty first century equivalent of the highwayman. There is plenty of opportunity to earn reasonable fees and make a comfortable living from party wall work. It is therefore incumbent upon members of The Faculty of Party Wall Surveyors to set examples of reasonableness, fairness and impartiality and to demonstrate to the outside world that we are possessed of a level of integrity which sets up apart from those who are only in the business to get all that they can out of it’
Kindly shared by Solicitors News