Basement excavations & damages for loss of value

News - 29/11/2012

Basement excavations are becoming increasingly popular in London and the South-East, and I am often asked to advise on the impact the works may have on the value of adjoining premises. This issue arises particularly where the basement is to be constructed in such a way that it might prevent future development of neighbouring properties.

[pullquote_right]… loss of value to a property caused by a neighbouring basement excavation could be recoverable … [/pullquote_right]

Section 7(2) of the Party Wall Act provides that the owner doing the work must compensate adjoining owners for “any loss or damage” that they suffer as the result of their works. The phrase “any loss of damage” might be wide enough to include any loss in value of the adjoining properties as the result of the basement works.

unfortunately there is no clear Court decision on this either way, so to provide some guidance on this issue I arranged a mock appeal which was based on hypothetical (but common) set of facts. The “Appeal” was heard by Mr Justice Akenhead, the judge in charge of the Technology and Construction Court, and was argued by leading barristers Nick Isaac and
Laura Collignon.

A full report of the Judgement can be found here. It is not a binding decision and should not be taken as advice or an indication that a similar case will be decided in a similar way. However, it is a helpful example of judicial thinking on the issue.

In essence, Mr Justice Akenhead thought that section 7(2) of the Party Wall Act imposes a very simple casual connection test; that is, if the damage was the result of the works under the Party Wall Act then compensation would be payable. The injured party does not have to show that his neighbour was negligent, or that the type of loss suffered was foreseeable, or meet any other hurdle.

That being the case the loss of value to a property caused by a neighbouring basement excavation could be recoverable.

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