Landmark decision by the Court puts an end to overvaluation claims by buy-to-let investors.
The basic facts of the case were that Mr Scullion purchased a buy-to-let property. A property broker organised a mortgage valuation with Colleys Surveyors (now part of Bank of Scotland) who confirmed to the mortgage company that the value of the property was £353,000, with a rental value of £2,000 pcm. Mr Scullion did not obtain his own valuation.
Within a short space of time, Mr Scullion realised that, at best, he could only achieve a rent of £1,110 pcm which, given the mortgage repayments of £1,400 pcm, soon proved to be a burden on him.
Mr Scullion therefore made a professional negligence claim against the surveyors for overvaluing the property. At first instance, the Court felt that this was a relatively low value transaction involving a private individual and it would be unreasonable to expect him to obtain his own valuation evidence.
The Court of Appeal, however, disagreed, stating that:
“Due to the investment nature of the Scullion purchase, it was not sufficiently clear that it would have been foreseeable…that Mr Scullion would rely on [Colley’s] report rather than obtaining his own advice.”
This is a blow to small time investors, particularly those who are looking to set up their pension funds in property, who rely on valuations prepared for lenders.
The decision does not however affect property owners making a professional negligence claim if it was their own residential property that was the subject of the overvaluation or if the buy-to-let valuation was carried out for them directly, rather than on behalf of a third party such as a mortgage company.
If you require guidance on overvaluation claims or wish to discuss any aspect of surveyors negligence or professional negligence law please feel free to contact specialist solicitor, Emma Slade, 0n 0333 888 0404.