It is well-established under English law that surveyors can owe duties not just to their own clients but to others who rely on their reports. For example, even where a mortgage valuation for a property purchase is undertaken primarily for the benefit of a lender, surveyors can also be found liable for their negligent valuations to the borrower. However, this tends to be limited to cases where the property is mainstream residential property. Commercial developers, or those buying more expensive domestic property, are generally expected to obtain their own surveys.

Last year, the High Court considered the case of Scullion v Colleys, in which Mr Scullion, the purchaser of a buy-to-let property, alleged negligence against his lender's valuer, Colleys. Mr Scullion was not buying "...industrial property, large blocks of flats or very expensive houses" but a single flat for approximately £350,000. The trial judge held that there was no general proposition that a buy-to-let transaction was any different from an ordinary residential house purchase, and found Colleys liable. That decision has now been overturned by the Court of Appeal .

The Court of Appeal found that the fact that the underlying transaction was a buy-to-let, rather than a purchase for owner-occupation, had a number of "repercussions". Commenting rather generically, the Court said that:

Those who buy-to-let even at the lower or middle range of properties were, "...as a class, likely to be richer and more commercially astute than people who buy to occupy."

  • They "...can therefore be regarded as more likely to obtain, and more able to afford, an independent valuation or survey".
  • They are also "...just as interested in [a property's] rental value as...in its capital value."
  • A lender-appointed surveyor would ordinarily be entitled to expect a borrower to obtain his own advice on the rental value of the property and in so doing, to get advice from his own surveyor as to the capital value too.

In the absence of clear, case-specific evidence, or industry-wide data to suggest the opposite, the Court thought that there was "...no inherent likelihood that a purchaser, buying the Flat for the purpose of letting it out, would rely on a valuation provided to the mortgagee". [Emphasis added]. Accordingly, Colleys owed no duty to Mr Scullion.

Comment

Given the current state of the property market, insurers of surveyors are already likely to be experiencing claims similar to Mr Scullion's. If the fragile economic recovery falters and bank interest rates rise, there may be many more. Although each case will turn on its facts, this one provides some comfort to insurers and to surveyor policy-holders that buy-to-let purchasers of even low-value properties will ordinarily be expected to obtain their own surveys, rather than rely on those obtained by their funders

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