Volatile Property Valuations – Professional Negligence Claims Against Surveyors

Uncertainty surrounding a potential property slump in 2021’s housing market has seen a number of residential properties being ‘down valued’, leaving surveyors liable to professional negligence claims.

House sales have been one area of the economy that has, so far, proved resilient to the challenges presented by the Covid-19 pandemic. Bolstered by the stamp duty holiday on houses up to £500,000, the average house price has increased by £17,000 in the past year, according to Rightmove – representing the largest percentage annual increase in four years.

However, with the stamp duty holiday set to expire in July and a housing crisis predicted, a survey from Bankrate UK discovered that 46% of buyers questioned had experienced a property being ‘down valued’. This is where the surveyor providing the mortgage valuation values the property at less than the asking price.

Negligence claims against surveyors

Establishing whether a valuation was negligent and what losses can be claimed is not a straightforward process. It’s not simply the prevalence of the down valuations that’s an issue, but the scale of the difference, which has – in some cases – been as much as 20% or even 30%.

The question such large discrepancies raise is whether properties are being correctly valued by surveyors. If not, it may be that buyers and/or mortgage providers will find that they acquire a substantially less valuable asset than they had been led to believe. In some circumstances, the discrepancy may be such that the surveyor’s conduct is negligent, and they could be held liable for the losses sustained as a result.

The Courts appreciate that valuations aren’t an exact science and, therefore, it’s to be expected that valuations will differ, sometimes considerably. A valuation will only be potentially negligent if it falls outside of the ‘margin for error’.

The margin for error is reached by determining what the correct nominal value of a given property was at the time of the valuation, and how much a reasonably competent professional valuation may deviate from that.

The breadth of the margin for error depends on the facts of the case but is normally somewhere in the region of ten per cent, although it can be higher or lower in certain circumstances. It’s not yet been established whether the uncertainty created by the coronavirus pandemic may, in itself, widen the margin for error.

If a surveyor is found to have been negligent, the starting point for any damages claimed by a purchaser will usually be the difference between the value of the property as acquired and the value assigned to it by the surveyor. Although, as always, the precise losses will be fact dependent. In relation to lenders where borrowers have defaulted, the damages claimed will depend on a number of factors, particularly whether, had the valuation been correct, the lender would have loaned in the first place.

Other issues to consider are whether the surveyor has excluded their liability for negligent valuations, whether that exclusion is enforceable and whether the claimant may be deemed to have contributed to their losses by their own negligence. For example, in a lender’s case, by having provided a loan where it was unreasonable in the circumstances to do so.

Establishing whether or not there is a legitimate claim for professional negligence isn’t easy. Therefore, we strongly recommend approaching a legal professional for advice and support throughout the process.