The issue of costs that are the responsibility of the tenant?16:06 PM, 30th July 2019
About 3 weeks ago 50
Buy to let investors who lost money because properties failed to achieve prices and rents advised by valuers have had the right to sue them for compensation upheld.
The right comes from a second judgment in the case Scullion v Bank of Scotland.
The original claim came from Scullion, a self-employed builder.
In October 2002, he bought a flat in Cobham, Surrey for £299,800 intending to let the flat for a rent that would cover the mortgage, any outgoings and to supplement his income.
He also hoped to make a capital profit at some time from selling the flat.
Colleys valued the flat for Mortgages plc, a subsidiary of Bank of Scotland.
The valuer reported that the market value of the flat was £352,950, whilst the rental value was £2,000 a month.
Eventually, he found a tenant willing to pay 1,050 per month in April 2003.
He sold the flat in May 2006 for £270,000 because the rent did not cover overheads. He paid £260,000 to the mortgagee, leaving an outstanding balance of around £71,000 on the original valuation.
The claimant alleged that both valuations provided by Colleys were negligent and claimed compensation for the rental and capital losses.
Giving judgment, Richard Snowden QC held that Colleys had a duty of care to Scullion because the valuer knew he would rely on their valuations when deciding whether to buy the flat.
The judge also ordered Scullion could recover the amount of his overheads, including mortgage interest payments and general letting expenses, less the rental income he received.
He made no order on the property valuation.
COMMENT: The decision is key because the judgment opens the way for buy to let landlords who lost money on investments they purchased on the strength of rental valuations that were inaccurate to seek compensation from valuers, who hold professional indemnity insurance.
Lawyers are advising insurers to negotiate a settlement that means a payment directly to mortgage lenders even though the judge recommended compensation could be spent as the claimant wished.
This is because mortgage lenders will also sue the valuer for any shortfall and the insurers are trying to divert the cash so they only have to make one settlement on a case.
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