Judges back valuers in buy to let negligence appeal

Judges back valuers in buy to let negligence appeal

15:36 PM, 23rd June 2011, About 13 years ago 13

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-Landlord loses battle for compensation-

Buy to let landlords have lost the chance to claim compensation from surveyors who overvalued an investment property following a successful appeal.

The Court of Appeal reversed a previous ruling against Bank of Scotland owned valuers Colleys in which a judge held a surveyor had a duty of care to a home buyer.

The decision means a valuer instructed by a lender has no legal obligation to a buyer who may rely on their valuation to underwrite the price and likely rent a property will achieve.

If a property fails to meet the valuer’s assessment, the buy to let investor cannot claim compensation for negligence.

The original claim in this case came from Mr Scullion, a self-employed builder.

In October 2002, Scullion bought an apartment in Cobham, Surrey for £299,800 as a self-funding buy to let investment.

He also hoped to make a profit on the purchase price from selling the flat at some later date.

Colleys valued the flat for Mortgages plc, a subsidiary of Bank of Scotland.

The valuer stated the market value of the flat at that time was £352,950, with a rental assessment of around £2,000 a month.

Scullion bought the flat but had trouble marketing the property at a rent of £2,000 a month, and eventually let the property for £1,050 per month in April 2003.

He sold the flat in May 2006 for £270,000 because the rent did not cover overheads from the proceeds. Scullion paid the lender £260,000.

In the March 2010 hearing, Scullion alleged the valuation provided by Colleys was negligent and claimed compensation for the rental and capital losses.

Giving judgment, Richard Snowden QC agreed 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 his overheads, including mortgage interest payments and general letting expenses, less the rental income he received.

The Court of Appeal rejected the lower court’s decision and held Colleys did not owe Scullion a duty of care, so he was not entitled to recover the lost overheads awarded in his initial claim.

The judges concluded in a domestic purchase the buyer is likely to rely on the valuation, but in an investment purchase, Colleys could not reasonably foresee that the investor would rely solely on their advice.

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16:50 PM, 6th July 2011, About 13 years ago

I get your point but the reason that this will never happen is the amount of valuation fraud that has taken place which has left lenders with significant amounts of 'toxic debt' on their books.

In fact, there has just been a case at the Old Bailey where a valuer was given a Bentley Continental, a Range Rover Sport and cash gifts to excessively over-value multi million pound London Properties which has caused the lender in question to lose millions as the fraudster has 'disapeared' with the funds raised. It turns out that properties are worth half what they were 'valued' at! Lenders are still culling valuation panels and solicitors panels to ensure that they try and guard themselves against fraud so that they have trusted firms working on their behalf.

I still don't see a problem with a buyer spending £500 to obtain a Homebuyers combined along with the lender's required standard valuation. This seems to keep everyone happy but investors baulk at paying an extra couple of hundred quid to get a more indepth survey or arrange their own assessment of the property.

Andre Gysler

17:41 PM, 6th July 2011, About 13 years ago

If a more in depth report is warranted or required I agree. But it is wholly unreasonable to make that the only avenue open to an investor to secure some kind of responsibility from the surveyor.

Surely the re-typing fee could work the other way round, whereby the borrower pays an additional £20-50 for the surveyor to send them their own report, not a copy of the lender's, one that the surveyor then has a care of duty to stand by his or her work.

Nothing you have said, changes the fact that surveyors do not want to stand by their work for the borrower. In fact, you actually alluded to the fact that they will include a multitude of disclaimers that would most probably mean they wouldn't have to stand by even a home-buyer's report.

Stuart Chell

13:57 PM, 12th May 2016, About 8 years ago

I was walked down the garden path by a Property investment company called Bueno investments in 2006. The flat sold to me was over valued by almost 100%, the banks valuation carried out by Colleys was £92 500. Like for like properties in the area I found out after the purchase were selling between £48K - £50K. Now they have no duty of care by law but surely the code must state you value the property at what its worth, what someone will pay for it? Is that not what a valuation is? These banks and surveyors have been having it off, mugs like me lending double what the property is worth and then having to pay it off, 10 years on a the property is not even worth £60K but I owe £80K. This in my opinion is criminal and should not be allowed to happen, and they (The Mortgage Business) closed shop and changed the mortgage rate mid term and I am paying 4.5% above the base rate when it should be 1.99% above base rate. They should all be locked up. Sorry but very annoyed about this and the fact that it is allowed to go on!

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