What’s a “Party Wall Agreement” and what does it mean for me as a home buyer if the property I’m buying requires I sign one? As a real estate broker in Stapleton I’ve had this question pop up on multiple occasions with home buyers because several of our local builders use these agreements. Here’s a quick post to explain it and provide you with a real world example of one such agreement.
Before I get into the details I should say that I’m not an attorney and because Party Wall Agreements aren’t typically Colorado-approved real estate forms I have to be careful not to provide legal advice. So my “CYA” disclaimer is that this is just my personal two cents, you can and should have an attorney look at your specific Party Wall Agreement before signing it.
So what is a Party Wall Agreement (“PWA”)?
A PWA is an agreement signed by two property owners who share a common wall. Its main objective is typically to outline how the parties will handle any repairs, maintenance or changes to the wall since it could potentially affect both parties. Typically this is a town home situation where the two homeowners have one common wall but it could also be a fence situation where the common fence is on both properties.
Why do PWAs exist?
Typically PWAs exist so both parties know the “rules of the game” as it relates to the common wall. That way if an issue arises, such as one party wants to make changes to the wall, the agreement dictates how that has to be done and who is to pay for it. The whole purpose is to establish responsibilities and rights of both parties BEFORE an issue arises, rather than after an issue arises when both parties have different expectations and motivations.
So is a PWA a good idea for me as a Buyer?
My two cents is yes, it’s good to have a Party Wall Agreement in place as a buyer. Of course I have to qualify that with every agreement is different and you should review it. But in general I think they are good to have for the reasons I’ve listed below.
- Most importantly to me, it lays out the rules of the game regarding these shared walls. An alternative to a PWA is to have an HOA which will have documents which spell out the party wall terms. The problems with HOAs is they come with monthly fees so if a PWA can be used to keep cost down I’m all for it. To illustrate how having the rules established up front is helpful let’s use an example. Let’s assume two town home owners share a common wall. If something happens, like a fire which causes damage to the party wall, it describes who needs to pay for the repairs, the quality of the work that needs to be done and the timing of when it needs to be done. So in our example let’s assume one party is negligent and caused the fire in their kitchen. If there was no agreement the guilty party could state “hey, it’s a common wall…let’s share the cost.” This of course wouldn’t work for the innocent party but with no rules in place it could be a legal battle that would be costly and take a long time. If you don’t have a PWA in place I think you leave things open to interpretation and that seems dangerous to me. One owner may see things very differently than another and without rules in place who is to say what’s right? I’m not saying this document would always help you, in fact something may happen where the rules of this document don’t favor you, but I’d personally prefer to know the rules going in rather than trying to hash out what to do with a neighbor when an issues arises. (See Section C, Section 3, Section 6.a, Section 9.a and Section 9.a of the sample party wall agreement above for Sections that discuss these issues)
- This document states that if one party damages the wall due to negligence they have to repair the complete wall at their sole expense. I like having this in place. (See Section 3.b of the sample agreement above)
- This document provides you with an easement to go on the other owner’s property to inspect and make repairs to the common wall if needed. This is important access to have in case you need to do work for any reason. (See highlighted Section 5 in the sample agreement above)
- We all hope to love our neighbors but what if you don’t get along with them? Good to have things spelled out in writing up front!
What else do I need to know about a Party Wall Agreement?
- Some sections of a Party Wall Agreement state what one owner can pursue from another owner if they are in default on this agreement. This section does seem to limit what one party can go after from another (for example no punitive damages) so depending on which party you are in the dispute this may be good or bad. (Again, read your own agreement to know what yours says about this issue)
- Many PWAs “run with the land”, meaning any time an Owner sells one of the units the new Owner will be subject to this same agreement.
What if things change over time, can the Party Wall Agreement be changed or terminated?
- Typically, the only way the agreement can be amended is if a certain percentage of the owners agree to the change. This is good, it gives owners some flexibility. Again, each agreement is different so review yours carefully.
Hope this information on Party Wall Agreements has been helpful. Be sure to review your own agreement, have your real estate broker review it and don’t hesitate to spend a little money on an attorney if you don’t feel comfortable with what you’re signing. (For the attorney we use and other contractors we know, like & trust check out our Contractor’s Corner list!)
If you are thinking about buying or selling in Stapleton in the near future please let me know if I can be of service. I work with both buyers and sellers in the area and I’d love to help you with your move!