Surveyors must pay compensation for negligent valuation
A firm of surveyors has been ordered to pay compensation to a finance company for negligently providing a property valuation that was far too high.
The case arose after the surveyors valued a house at £3.4m in July 2007. On the basis of that valuation the finance company provided the purchaser with a loan of £250,000 by way of a second mortgage. The purchaser later got into financial difficulties and the property was repossessed and sold for £2m.
The property had been subject to a first charge in respect of the first mortgage and so the finance company didn’t recover any of its losses.
The court held that the surveyors owed a duty of care to carry out the valuation to the standard of a reasonable valuer of ordinary competence and experience.
The correct valuation of the property at that time was £2.8m with a 10% range either way. The surveyors’ valuation report and accompanying notes had not explained how they had arrived at a figure of £3.4m. It was a valuation which no reasonable valuer could have suggested.
The surveyors had been negligent because they had failed to approach the valuation process in the right way. The finance company had relied on the valuation when making the loan and was entitled to be compensated for its losses.
Please contact Matthew Melling for more information about the issues raised in this article.