Who can hold security for expenses under the Party Wall etc. Act 1996?

Abstract

Following a number of cases in the High Court, the Solicitors Regulatory Authority1 (SRA) issued a warning in December 2014 against the improper use of solicitors’ client accounts as a banking facility. As a result, solicitors were no longer happy to hold security for expenses under the Party Wall etc. Act 1996 (PWA) unless they were also giving legal advice as a solicitor in connection with the PWA. There being no readily accessible alternative, this created a practical problem for building owners required to give security, and a number of companies began offering to do so as ‘escrow agents’ or stakeholders. Some, but not all, are regulated and supervised under the Payment Services Regulations 2017 (PSR 2017) and there is confusion among surveyors and the unfortunate parties caught up in the PWA process as to what legal requirements must be met before someone can provide what appears to be a simple and obvious service. The complication arises from the fact that the very act of holding security for expenses involves a person or entity accepting money from one party with the sole and specific intention that it may be paid to one or more third parties. Anyone offering such a service is providing a payment service as defined in PSR 2017 and must be regulated by a designated supervisory authority. This paper explores and clarifies why holding security for expenses is a regulated activity under financial services legislation, what exceptions there may be, and which supervisory authority might be appropriate in the context of the PWA. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/ business/.