Surveyor negligent despite inflated purchase price

26/03/2010

The Court has recently provided a reminder that surveyors will be held to account for negligence, even where the purchaser claimant has arguably supplied misleading information.
The claimant purchased a flat in a residential block as a buy-to-let investment. The claimant stated in his application for finance that the purchase price/estimated value of the flat was £353,000, and applied for finance of 80% of that sum.
The defendant surveyor (who worked for Colley's, then part of Halifax plc) provided the lender with a valuation report assessing the market value of the flat as being the price he thought the claimant was going to pay for it (£353,000) and estimated the expected rental at £2,000 per month.
The purchase price, although technically £353,000, was subject to a 'gifted deposit' from the vendor to the claimant, which returned to the claimant 15% of the purchase price initially and a further 10% deferred for a year.
After completion the claimant was only able to achieve a rental of around half that estimated by Colley's, and brought proceedings claiming that the flat was worth only £250,000 at the time it was purchased (although the claimant subsequently sold it for £270,000). The claimant alleged that the valuation report negligently overstated both the value of the flat and the expected rental returns.
Despite Colley's contentions to the contrary, the Court held that:

1. Colley's did owe a duty of care to the claimant, and that the duty had not been excluded by a disclaimer in the mortgage application form;
2. the claimant was not precluded from bringing his claim as a result of the representations as to the price of the flat made to the mortgage lender;


3. the claimant did in fact rely upon the valuation (both of the purchase value and the rental value); and


4. the valuation was sufficiently above the allowable margin for error that it was negligently made.

The Court reserved the issues of quantum and contributory negligence to a further hearing if the parties could not come to an agreement between themselves.

Scullion v. Bank of Scotland plc (t/a Colleys) [2010] EWHC 572 (Ch)

Contact: simonmunro@city-law.net

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