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
Download your free guide.
Four new types of prior approval for solar developments
Online Planning Portal application types from 5 September.
Election fails to spark construction industry revival
Contract awards and planning; post election.
Making diversity and inclusion easy for SMEs
The CIOB tool for companies with limited resources.
Sustainable Futures: Redefining Retrofit for Net Zero Living
BSRIA Briefing 2024, initial speakers announced.
Looking back at the UK's first Passivhaus leisure centre
Reflections on St Sidwell’s Point with CIAT.
A-Level results and electrical apprenticeships
Electrical Skills Index highlights areas with skills shortages.
One of the world's more unusual drive-throughs.
A quick introduction.
Hadrian's Wall Path and the national trails
The trails are heritage assets in their own right.
Articles on timely advice and hydraulic lime.
Building Designers Association of Australia
CIAT and BDAA sign Memorandum of Understanding.
Built Environment Inclusive partners issue statement committed to inclusion.
Building regulation requirements can have unintended consequences.
CIOB announces 2024/25 vice president
Sustainability champion Professor Saul Humphrey.
Accelerating towards a net-zero built environment.