Good Party Wall Agreements Make Good Neighbors
A party wall agreement ensures rules and restrictions in complexes, covering more than a shared wall.
Purchasing a residential property sometimes involves sharing with your neighbors.
A good party wall agreement will identify responsibilities and what to do if the terms of the agreement are not followed.
What is a Party Wall Agreement?
A party wall in its simplest version, is an agreement regarding a shared wall that divides a couple of attached dwelling units. These are often referred to as duplexes. However, party wall agreements may cover much more than simply a shared wall. Some party wall agreements are similar to homeowner covenants.
The party wall agreement is a set of rules and restrictions imposed on each of the owners. This is because there may be several responsibilities that need to be shared between the owners of the units. The purpose of the party wall agreement is to establish the rights and responsibilities of each property owner before there are any issues.
Party wall agreements often discuss shared insurance, maintenance, and shared costs. Examples of issues covered in the party wall agreement:
- Example: The owners might want to require each owner to have adequate insurance in case the roof is damaged in a storm.
- Example: An owner that wants to paint the exterior of the (quad)plex may have an obligation to obtain consent from the other owners and the other owners may have an obligation to pay a portion of the cost to paint the exterior of all townhomes.
- Example: An owner may need an easement across a second owner’s property to maintain and repair the landscaping, utilities, or the exterior of the first owner’s unit.
A party wall agreement can be used when more than two units are involved. A Party wall agreement may be drafted to cover a variety of situations including where units are on separate floors. While a party wall agreement and traditional declaration of covenants, conditions, and restrictions may share many of the same concerns, they are generally more comprehensive used in condominiums or situations with a larger number of units.
Without such an agreement, many murky situations could arise, including:
- An owner can change the exterior of the property without the knowledge or consent of the other owners.
- An owner can refuse to pay shared costs resulting in a lapse in maintenance or unrecovered costs incurred by the performing owner.
- An owner fails to maintain adequate insurance resulting in a lack of funds to restore and repair damages.
Legally Binding Agreements
Party wall agreements that are recorded in the office of the applicable county clerk and recorded against property are legally binding and run with the land.
A buyer should review a copy of any party wall agreement and any amendments identified in the title commitment before the title objection deadline.
This will avoid uncertainty about the expectations of either property owners’ obligations or rights.
Why Do Party Wall Agreements Matter?
Party wall agreements are critical documents. For residential owners and renters, these agreements identify how the units relate to each other. Failure to abide by the terms of the party wall agreement can result in financial penalties and liens against a non-performing owner’s unit.
Ultimately, the goal is to maximize the value of all the units through clear articulation of what is expected of the owner of each unit. This reduces the possibility of conflict and lawsuits.
Issues to Consider in Party Wall Agreements
Many issues can be addressed within a party wall agreement. A few essential issues to address include:
- Individual: Unit owner’s ability to maintain the individual unit. (Landscape, walkways, parking/garage)
- Is approval needed/No approval needed?
- Approval majority or unanimous?
- Collective: The unit owner shared maintenance to the collective (landscape, waterline, irrigation, parking/garage, exterior paint, roof, utilities not separately metered, trash)
- Is approval needed/No approval needed?
- Who decides maintenance is necessary?
- How is the expense split? Are expenses always allocated against the owner equally or based on the square footage of the unit?
- Who hires and supervises the contractor?
- Enforcement: What are the consequences when an owner fails to comply with the party wall agreement?
- How much time does an owner have to respond or perform?
- Does an owner get to perform on behalf of the non-performing owner?
- Is money non-reimbursed get charged a late fee or interest?
- Does one get to record a lien against the property of another owner for non-payment?
- For example, will both parties evenly split the expenses?
- Or, for example, will one party pay more than the other depending on how much of the wall they own or what is in or around the wall?
Review Party Wall Agreements as Due Diligence Deadline
Any existing party wall agreements should be reviewed before the title review objection deadline. By doing this, the buyer will know what is expected and can discuss how the property is being administered by all the owners in the community.
Enlist the Help of a Real Estate Attorney
Party wall agreements can be complex and confusing. Anyone who is considering a new party wall agreement or has been asked to consent to an amendment to an existing party wall agreement should discuss their situation with a real estate attorney.
Robert Fischer is an attorney at the Fischer Law Office. With two decades of experience, Fischer is one of Colorado’s leading commercial real estate attorneys. He provides a full range of transactional legal services for professionals looking to buy, sell or lease commercial real estate.