Negligence — Mortgage loan — Valuation report — Allegation that valuer failed to draw attention to matters that required serious investigation, which would have revealed radical defects — Nature of a mortgage valuation report — What can reasonably be expected of a valuer — In the present case the silence of the report on matters which should have been mentioned led the plaintiff to believe that there was nothing to worry about when in fact there was a great deal to worry about
in question was a semi-detached house, about 50 years old — The asking price
was £35,000 and the agreed purchase price £31,500 — The plaintiff applied for
and obtained an advance from the Alliance Building Society of £20,000 — The
defendant was instructed by the society to carry out a valuation of the
property for the purpose of the loan and a copy of his report was given to the
plaintiff — She had herself inspected the property, which was admittedly in a
filthy and dilapidated condition — She saw that some repairs and replacements
were needed and she intended to carry out some improvements — It was obvious
that a substantial cleaning and redecoration job would have to be done — She
was prepared to spend a few thousand pounds on getting the property into a
decent state — The defendant’s valuation report seemed to convey a reassurance
that the house, although it needed to have some things done to it, was
basically sound — The plaintiff, relying on this, went ahead and completed the
purchase — It was a condition of the loan that the plaintiff should carry out
external and internal decoration in due course
report, after a general description of the area, declared the house as ‘a
poorly maintained and decorated pre-war house of very basic quality’ — It was
stated to be ‘in need of complete redecoration and renovation’ — Many fittings
were said to require replacement and ‘the exterior maintenance has been
neglected’ — However, it ‘provides the basis for a potentially attractive and
comfortable home and is acceptable as a security in its present condition’ — In
a box headed ‘Essential repairs: Estimate costs for each item’, the valuer
wrote ‘None’ — The value of the house in its then present condition was put at
£30,000 — In some contemporary notes made by the valuer when he walked round
the house, but not recorded in the report, it appears that he noticed wet rot
in the wooden window frames, rust in the metal frames, rain penetration of the
ceiling in the main bedroom and cracks in the rendering of the bay
started quickly, with the aid of a builder, on her plans for repairs and
improvements and reached a decision to replace the roof — However, she received
the first of many shocks when an electrician, engaged to install power points,
discovered that the ground floor was riddled with woodworm — Worse was to come
— It was found that not only the whole of the ground floor but also the
first-floor landing, the staircase and the front main bedroom were heavily
infested with this woodworm — Despite the shocks, the plaintiff carried on with
remedial works, so that before the present action began a good deal of such
works had been done — There was no dispute that a duty of care had been owed to
the plaintiff — The only case referred to in the judgment was Yianni v Edwin Evans
& Son — Henry J summarised the duty as ‘to take reasonable care in and
about the inspection of the property; to observe substantial defects that
either presently require or will within a relatively short term in the
time-scale of the loan, say, within five years or thereabouts, require work; or
to put the purchaser on notice that enquiries are necessary to establish
whether there are such defects’
heads of criticism were made of the report in the present case, as to matters
which should have been the subject of comment or warning — These were the state
of the roof, the infestation with woodworm, the state of the bay and the wiring
and heating — The judgment deals in detail with each of them — Briefly
summarised, the judge’s findings were as follows — As regards the windows, at the
very least the need to replace rotted wooden windows should have been listed
under ‘essential repairs’ — As regards the disastrous outbreak of woodworm,
even if the floor boards were covered up at the inspection, some indications
should have been found; the valuer looked into the cupboard under the stairs (a
good place to detect trouble) but apparently failed to see the tell-tale
boreholes and frass — This was a serious failure — The report did not mention
the bay, although the valuer’s notes showed that he had seen cracks in the
rendering; in fact the bay was detaching itself from the main structure, owing
to wet rot attacking the million — As regards the defective electric wiring and
the old central-heating pipes (apart from the boiler with the ‘dangerous’
notice on it), there should have been some warning in the report
these findings it was clear that the valuer had failed to measure up to the
duty of care which was binding on him; and the judge was satisfied that if the
plaintiff had received the kind of valuation report which she should have had
she would not have purchased the property — At the end of his judgment, Henry J
repeated his understanding of what was required of a mortgage valuation report
— He said:
on the basis of an inspection which on average should not take longer than
20-30 minutes. It is effectively a walking inspection by someone with a
knowledgeable eye, experienced in practice, who knows where to look — I take
the cupboard under the stairs as an example — to detect either trouble or the
potential form of trouble. He does not necessarily have to follow up every
trail to discover whether there is trouble or the extent of any such trouble.
But where such an inspection can reasonably show a potential trouble or the risk
of potential trouble, it seems to me that it is necessary . . . to alert the
purchaser to that risk, because the purchaser will be relying on that form.
Judgment for
plaintiff
The following
case is referred to in this report.
Yianni v Edwin Evans & Sons [1982] QB 438; [1981] 3 WLR 843;
[1981] 3 All ER 592; [1981] EGD 803; (1981) 259 EG 969, [1981] 2 EGLR 118
This was an
action by the plaintiff, Mrs Lloyd, against Mr J A Butler FRICS and the
Alliance Building Society for damages for negligence in the carrying out of a
mortgage valuation of a house at 15 Fairwater Avenue, Welling, Kent, which the
plaintiff purchased in reliance on a mortgage valuation report prepared by the
defendants on the instructions of the Alliance Building Society.
Adrian Brunner
(instructed by Simon Langton & Co, of Rainham, Kent) appeared on behalf of
the plaintiff; Colin Nixon (instructed by Berrymans) represented the
defendants.
Giving
judgment, HENRY J said: In the summer of 1984 Mrs Lloyd, the plaintiff,
wished to purchase a small semi-detached house called 15 Fairwater Avenue in
Welling, Kent, and for that purpose required a mortgage from the Alliance
Building Society. She applied for such a mortgage. The Alliance, in considering
her application which they eventually accepted, required a mortgage valuation
report which was prepared by one of their chief valuers. A copy of this report
was sent to Mrs Lloyd. The loan was made to her. She completed the purchase of
the property. She then discovered that the property was in a worse state than
she had had reason to believe and accordingly brings this action for damages
alleging negligence in the preparation of the mortgage valuation report.
At the time in
question she was a married woman. She had married in 1974 and separated from
her husband in 1981. Sadly he had died shortly before the events in the summer
of 1984 with which we are concerned. This left her at 37 with children aged six
and five. Her father had also died about the same time. He had been a butcher
in Welling. Her mother was taking over her father’s shop. She wished to live
and work in Welling, the work being assisting her mother in that shop. She was
living at the time in the Isle of Grain and was commuting to this work. She
wanted to move with her two boys to Welling.
Through a
customer of the shop she heard of this property. The mother of the customer had
been living there alone and the property was absolutely filthy at the time when
she saw it and it was clearly in a dilapidated condition. She inspected it with
the potential vendor, that is to say, the customer who was the daughter of the
old lady who had been living there. It was where she wanted to live and she was
not deterred by the condition of the property because she was an experienced
decorator and to some extent relished the opportunity of being able to decorate
it all to her own taste.
The asking
price for the property was £35,000. She could not get the vendor down below
£31,500. She told me that she intended to spend something between £35,000 and
£36,000 in all on the property. Having agreed that price, subject to contract,
with the vendor, she then by a document made out by her on June 28 and sent to
the building society some 10 days later by her solicitors applied for an
advance of £20,000 towards the purchase price. In that application form she
said this about the property:
What is the
approximate age of the property? 50
years. What materials are used in the construction of the external walls? Brick. The roof tiled.
She had all
the main services down as being connected to the property.
Are you going
to make immediate improvements in the property?
She had ticked
the box saying ‘Yes’. She had listed the improvements that she was going to
make as ‘Replace loose tiles and ceilings’. Additionally it is clear that by
the time of completion she had determined to do other works as well. We know
this from the
First, she was going to install effectively a new kitchen. Second, she realised
that the central-heating boiler needed replacing and was going to have a new
boiler. She had seen a sign on the existing system ‘Dangerous. Do not use’. As
her application form makes clear, she had looked into the roof space of the
building, seen daylight through the light and so knew that certain tiles needed
replacing. She also had noticed, so she told me, that water had come through
the roof, as was demonstrated by the ceilings of bedrooms one and three. Her
reference to them in the application form shows she had realised that they
would have to be replaced. The kitchen window and the back door (the patio
door, as she describes it) she intended to replace. She had also noticed a
crack that was in the rendering of the house in the front bay. She additionally
wished to install six electric points downstairs. It appears from this that she
assumed that the wiring downstairs though old was serviceable. That was what
she intended to do. So far as she was concerned the rest would be simply a
redecoration job — substantial cleaning and then redecoration. She hoped that
the works would be done shortly after completion — 14 days was the time that
she gave to me. She could then move in with her family and decorate around them
as they lived there — or so she hoped.
That was her
application form. As a result of making that application, instructions were
sent by the Alliance to Mr J A Butler [FRICS] to carry out his inspection of
the property for a mortgage valuation report. He was not told, because the
system did not arrange for this, of the improvements that she had mentioned in
her application form that she proposed to carry out: namely replacing the loose
tiles and ceilings. He was not given any further information about her or her intentions.
The only relevant information that he was given was the agreed purchase price
of the property, £31,500, and the advance requested, £20,000.
He completed
that form and a copy of it was sent to her. In that form he described the
property as being a semi-detached house, 50 years old. In relation to services
he said all main services plus gas-fired central heating. Observations as to
position, locality, aspect and surroundings and distance from local transport
facilities, shops and schools. He said:
Residential
area of similar small very speculative quality houses on the outside of
Welling, within easy reach of most town centre facilities and Black Fen
shopping area of Sidcup.
In the box
headed ‘Essential repairs. Estimate costs for each item’, he wrote ‘None’. In
the box ‘General Observations’, he entered:
A poorly
maintained and decorated pre-War house of very basic quality. In need of
complete redecoration and renovation. Many fittings require replacement and the
exterior maintenance has been neglected. The property, however, provides the
basis for a potentially attractive and comfortable home and is acceptable as a
security in its present condition.
Then when
dealing with mortgage valuation, the introductory note is:
The valuation
for mortgage purposes does not necessarily take into account immediate local
market or other special conditions which may be reflected in the purchase
price.
Basis of
mortgage valuation.
(1) In present
condition £30,000.
Then (2)
underneath that in a position where it can be added to that sum, if relevant,
is: ‘Estimated costs of repairs itemised above.’ Finally the total below the line of the
matters above the line one has ‘(iv) Value when recommended repairs and
roadworks completed.’ Mr Butler had left
that blank, though some secretary had done the addition and, adding nothing to
£30,000, she had filled in the figure of £30,000. That form was signed by Mr
Butler as the valuer.
We know from
certain contemporary notes that he made on the form itself when he walked round
the house that though there was no specific reference to the matters in the
body of the report, he had noticed, but presumably did not consider it worth
recording, first, that there was wet rot in the window frames; second, that
where the window frames were metal they were rusted and that there had been
rain penetration of the ceiling in the main bedroom. He described the outside
decor of the house as being poor. He had observed the cracks in the rendering
of the bay.
As a result of
that form, the offer of a loan was made to her on July 13, subject to a special
condition, namely:
Obtaining and
placing with the title deeds an undertaking signed by the applicant to carry
out the following work: within six months of completion redecorate the exterior
of the property, within 12 months redecorate the interior of the property.
The effect of
that mortgage valuation report — the fact that the loan was granted with those
conditions — on Mrs Lloyd was as follows. On reading that document she felt
that there were no hidden traps or snags in the property. She was reassured
about the crack that she had observed in the front of the house. She believed
that the house had had a good going over and had been passed as fit. She
thought effectively that it was a basically sound house and she could carry on
with her plan of moving in 14 days after completion, by which time the work she
had in mind could be done, and redecorate around her. She did not try to
negotiate the vendor down any further as a result of that report. She visited the
property only once more, a second visit in order to measure up. She undertook
no further investigation of the property.
On the first
day after completion she attended at the property with a Mr McDonald, who was, inter
alia, a builder who had been recommended by a friend of hers. The immediate
task that she required of him was to look at the roof where she had observed
the loose and/or missing tiles. Mr McDonald said that he looked for evidence of
water staining inside and this was extensive in the front main bedroom and very
apparent in the rear bedroom. There was severe erosion of the plaster in
bedroom one up by the chimney breast, to the extent that it had caused wet rot
in the timber picture rail. He then put his head into the roof void and with a
torch observed substantial water staining on the roof timbers throughout the
roof space, but to a greater extent on the rafters and the arch around the
chimney breast trimmer. He observed that the tiles were between-the-wars
machine-made clay tiles from Holland, which are common in this part of the
world but which have a weakness, in that after a time they laminate or flake at
the bottom. The consequence of that flaking is to remove the lugs that attach
the tile on to the batten, and because no nail is used in this tile, when the
lugs are gone they are easy to dislodge. He observed lamination problems under
the roof.
He told her
that the condition of the roof could be remedied in the short term by the
expenditure of a few hundred pounds but she would have to anticipate annual
expenditure for putting matters right after that. He told her that the other
option was to replace the roof, and in his opinion that was what was really
needed. She chose, he said, to do that. He was also asked then and there if he
could undertake the other jobs which I have enumerated as those matters that
she planned to do.
He started
work almost at once on those matters, including the installation of the power
points on the ground floor. The electrician who was doing this job on the ground
floor discovered that the floor of the property was riddled with woodworm. The
moment that discovery was made, the electrician summoned Mr McDonald to the
house, and he then found that the whole of the ground floor of the house, the
staircase, the first-floor landing and the whole of the front main bedroom
including the studding under the bay was heavily infested with common furniture
beetle, which is usually called woodworm. He judged that the ground floor was
so heavily infested that it was impossible to treat. On discovery of this rot
and the extent of it, allied with various other matters, he told Mrs Lloyd that
she had spent too much for the property and advised her to consult her
solicitors with a view to them, inter alia, appointing someone who could
act as an expert witness in the case.
Accordingly, a
Mr P E Dowdell [FRICS], a partner in Shirley & Partners, chartered
surveyors, valuers and estate agents, was appointed to act. He went to the
property on November 9. He said:
Visual
inspection of the understair cupboard immediately shows a considerable extent
of common furniture beetle by both the flight holes and the frass on the floor.
Boards adjacent to the cupboard door were partially collapsed due to having
been eaten away by the common furniture beetle, but obviously this could have
been covered at the time of an earlier inspection. By the time of my inspection
the living-room floor had been completely renewed due to the extent of common
furniture beetle in the old timbers. I have examined these timbers and would
have thought that under normal circumstances this infestation would have been
identifiable by a surveyor, but it is of course possible that the infestation
was concealed by floor coverings.
He says in
relation to the kitchen/diner:
At the time
of my inspection the floor of the kitchen/diner had been completely removed.
He deals with
various other matters. At the time of his inspection he says that much of the
remedial work necessary to the property had already been commenced. He finally
concluded that the value of the property at the time of inspection was £24,000
with vacant
that he made as to the property, which I will come to later when I examine the
matters here.
In that
earlier report there was no mention of the roof at all. He then inspected the
property again on December 7 1984 and after that second inspection the
defendants were notified for the first time. A letter before action was sent to
them on December 12 1984 in which the matters the subject-matter of complaint
were expressed as follows:
Our client
sent in builders to put in electric points on the ground floor of this
property. Upon inspection they found that the floor boards in this house were
riddled with woodworm and that the property was generally in a terrible
condition, requiring extensive renovation to be placed in a habitable
condition.
That was
effectively the letter before action. At the time that letter before action was
sent a good deal of the remedial work had in fact been done and the defendants
did not in the event inspect the property at that time.
These repairs
were then carried out by Mr McDonald’s firm and other workmen. In the event,
Mrs Lloyd was out of the property until March 1985, when, four months later
than she had anticipated, she moved in. Over that time she lived with her
mother in Welling. She described her feelings on the discovery of all these
difficulties as one of despair. Her Isle of Grain house proved to be unsaleable
owing to its condition, but I have no evidence as to precisely when she
realised that this was the case.
Her case was
effectively that if she had been put on notice of all these matters she would
not have purchased this property because she simply could not afford to put all
those matters right. She thought that all that she would have to do were those
works that I have already enumerated, and on top of that it would simply be a
task of redecoration. She had been, so she said, relying on the report to see
whether a full survey was necessary. When the report told her that there were
no essential works which needed doing, she had taken the view that further
investigation was not necessary.
It is conceded
on all sides that in preparing the mortgage valuation report, a copy of which
was sent to her, the preparer of that report owes the prospective purchaser a
duty of care. This was not something universally appreciated in the surveying
profession prior to the case of Yianni* in 1982. However, that duty is,
and was in 1984, well known and accepted — as Mr Dowdell put it to me: ‘The
duty is there, whether we like it or not, purchasers rely on us.’ Because of that reliance it seems to me that
these reports should alert purchasers of substantial defects which the
purchaser should be aware of; because purchasers will rely on these reports,
first, to decide whether to investigate further; second, to decide whether to
negotiate further; and ultimately to decide whether to complete. There was not
a great deal of difference between the various experts that were called before
me as to the extent of the duty. It seems to me that the duty is to take
reasonable care in and about the inspection of the property; to observe
substantial defects that either presently require or will within a relatively
short term in the time-scale of the loan, say within five years or thereabouts,
require work; or put the purchaser on notice that inquiries are necessary to
establish whether there are such defects.
*Editor’s
note: Yianni v Edwin Evans & Son [1982] QB 438; (1981) 259 EG
969, [1981] 2 EGLR 118.
It follows
from the fact that purchasers rely on these forms that it would be quite unsafe
for the valuer, when answering the question ‘Essential Repairs’, to look at
that answer simply from the point of view of his clients, the building society,
who are deciding whether to advance the money, in a case particularly such as
this where less than two-thirds of the purchase price was being advanced. What
may be essential from the lenders’ point of view to secure their loan might be
different from, and narrower than, what would be essential to a purchaser who
was interested in preserving the value of the property. It seems to me,
therefore, that those filling out the form must take into account the effect
that the form will be likely to have on the purchaser, as this form undoubtedly
did have its effect on Mrs Lloyd.
Mr I Farrell
[FRICS], the expert called on behalf of the defendants, went a considerable
distance in his evidence in this direction, pointing out that what is essential
from the point of view of the purchaser may be wider than what is essential to
the vendor, though he felt ultimately, probably, it came to much the same in
most cases. But he certainly believed that there should have been entries in
this form under the column ‘Essential Repairs’. He thought that the sort of
defects that should have been mentioned in the form were repairs which ought to
have been done as a matter of urgency, such as water leakage, repairs which
clearly would be necessary some time soon, such as woodworm and rot, and
repairs which were desirable but did not necessarily affect the security, such
as extending the electric system, improving the heating or matters of that
kind. He felt that the forms should identify potential problems, and indicated what
a blow it was when a purchaser who has committed himself perhaps to the
greatest extent he can suddenly finds, for instance, that an unexpected
rewiring is forced on him. It was, in Mr Farrell’s word, a ‘disaster’ for the
purchaser, and it was to matters such as that that he believed these things
should go.
The point is
also made to me by the defendants that to some extent even though Mr Butler had
completed the heading ‘Essential Repairs’ ‘None’, he had observed that the
house was in need of complete redecoration and renovation. ‘Many fittings
require replacement and the exterior maintenance has been neglected.’ However, in answer to that, the point is made
to me that that must be read and interpreted in the context of the whole form,
which says that no essential repairs are necessary.
So far as Mr
Butler’s inspection was concerned, he (not surprisingly after all this time and
having first been asked to cast his mind back to it some five months after his
first inspection of it) cannot remember the details of what was — and no
complaint is made of this — simply a 20- to 30-minute inspection. He remembers
the generally filthy condition of the property and nothing else. He remembers
gaining the impression that a lot of money would have to be spent on it. He was
looking for major features that would affect the value of the structure and the
safety of the building. As to looking into the roof space, he says he would not
have looked into the roof space unless he saw cause for suspicion outside. But
it seems to me that here he did not have to go outside to see if there was
cause for suspicion, because as a result of the leakage that he had observed in
the front bedroom ceiling he knew that water was coming through the roof.
He seemed from
his evidence to be cautious and stringent in what he was prepared to list as
essential repair, seeming to feel that the danger from the purchaser’s point of
view of his listing a repair as essential was that if he were to list such a
repair as being essential then the purchaser might be obliged to perform that
repair as a condition of getting the loan. However, it was, as we have seen, he
said ‘Essential Repairs’ ‘None’ on this case. Though he did not specifically
refer to any defect at all in his report, save for the poor state of
maintenance and decoration and the need for complete redecoration and
renovation and the replacement of some fittings, he says that in arriving at
his valuation — the figure of £30,000 — he took into account all that he saw
when he actually visited the property.
The five
specific heads of criticism of the state of the property made in this case —
matters which it is said should have been referred to in some form or other in
the mortgage valuation report — are the state of the roof, the infestation with
woodworm, the state of the windows, the state of the bay and, finally, the
wiring and heating — the services which one can take together.
As to the
initial state of the property, and in particular the state of the roof, and the
initial discovery of the woodworm, the principal witness is Mr McDonald, though
he is to a large extent, as I will come to, corroborated by Mr Dowdell. He was
a forceful witness with an unusual curriculum vitae. He is a master builder, a
bachelor of science in civil engineering, and as well as being a builder has
practical experience of surveying properties. He used to conduct valuation
surveys both for mortgages and structural surveys. He took a great interest in
the case and is a crucial witness. It was he who saw the property on the first
day after completion. He, as I have indicated, had been recommended to Mrs
Lloyd through an acquaintance. They had not, so far as I am aware, previously
met, and on the first day he advised replacement of the roof and the windows,
neither of which she had previously contemplated. (I say on the first day; it
may be that the advice as to the windows was not then given.) He got on with the work in relation to the
roof at once, as Mrs Lloyd wished, because, as I say, she wished to move in
soon. It was then, as I have indicated, that the infestation was discovered and
by that time, and by the time the defendants had been notified, a lot of the
work had been done and much of the evidence of the original state that the
building was in was no longer ascertainable by the time the letter before
action was written in December 1984. This factor combined with the speed with
which all these matters had been done excited the
suggestions of it seen in the original expert’s report, is a considerable
suspicion of what Mr McDonald said he saw at the time. The suggestion that was
clearly behind the witnesses’ attitude, though it was never formulated or
expressed, was the suspicion that this was a builder who had talked a purchaser
into doing unnecessary work and was now assisting her in recovering the cost of
that work, which had been done by his firm, from the defendants. This was not
articulated but it was behind, it seemed to me, the unwillingness of the
defendants’ witnesses, who had not seen the property at the time, to accept
what Mr McDonald had said about it.
This suspicion
was to some extent fuelled by the fact that as a result of observation through
an instrument that enables you to see beneath floorboards without removing
them, the defendants believed that the joists under the living-room floor were
the original joists and had not been wholly replaced as Mr McDonald said they
had been. This was put to him in cross-examination. He, without heat but with
considerable firmness, said that all the joists had been replaced and it would
be a relatively simple matter to take up the floorboards to see that this was
the position. The floorboards were taken up and that showed this to be just as
he had said.
This did not
come as a surprise to me because, to a considerable extent, his evidence was
corroborated by the evidence of Mr Dowdell, who was on the scene eight days
after Mr McDonald was there: an independent expert witness whose initial report
is effectively a contemporaneous note of what he saw. I will be dealing with it
in some detail later, but it is sufficient for present purposes to say that it
corroborates Mr McDonald’s evidence in many material particulars.
So all in all
it seems to me that the suspicions about Mr McDonald had been ill-founded. I
can accept his evidence as to the state of the property as being accurate. It
seems to me that, far from his great interest in the case inviting suspicion,
his actions throughout have shown a commendable concern for Mrs Lloyd and the
predicament in which she found herself. I am quite satisfied that he was acting
in her best interests throughout and was showing proper concern that she should
not spend unnecessary money that she did not have on this property.
I come now to
the individual matters of which complaint is made. The first of those relates
to the roof of the property. The original intention had been to repair the
roof. Mrs Lloyd thought this was a question of replacing a few slates. She did
not anticipate having a new roof. On her evidence, Mr McDonald advised her on
November 1 that it was in her financial interest to put the roof right at once
by a replacement roof.
What turned
out to be wrong with the roof was three things. First, there had been a considerable
ingress of water at the chimney breast. This was where a cement fillet had
moved, as such fillets commonly do move, away from the chimney breast. That
required mending and replacement with a metal fillet of some sort. Second, so
far as the ridge and hip tiles were concerned, there was no adhesion to the
roof in them because many had got detached from the mortar bed on which they
lay. Mr McDonald was of the view that with roofs like this it was more
economical to replace them wholly than to do a repair job. Finally, and most
significantly, he took the view that these tiles were near the end of their
useful life. If this roof was patched up, he took the view that there were
three to five years left in it. Mr Dowdell took the view that there were probably
five years of patching left in the roof. There was a lamination problem, Mr
McDonald said, and I accept, so that the lugs on which the tiles depended on
the battens had flaked off and they could be shifted by wind at the moment.
It was his
view that the basic repairs to the roof, that is to say, remedying the water
ingress, dealing with the ridge and hip tiles, and replacing the tiles that had
become displaced, would have been in the region of £300 to £400. Thereafter
there would be an annual replacement task and the minimum, he said, that a
building company would charge for replacement was £100. So far as the roof
timbers were concerned, he found it necessary to replace only the battens. He
thought that in all the circumstances a new roof, which he eventually provided
for at a cost of £1,200 plus VAT, would in the long run be a cheaper course to
take.
Mr Dowdell
observed certain of the discarded tiles in the garden. He thought that, almost
without exception, they had reached the end of their useful life, and he agreed
with Mr McDonald’s advice from, he said in his report, bitter experience.
Mr Farrell and
Mr Butler simply did not believe Mr McDonald’s account of it. In so far as this
disbelief was based on anything other than the suspicion I have already
indicated, it was based on two matters to which Mr Farrell drew attention.
First, the other half of this semi-detached house, no 17, has a similar sort of
roof in good condition, though many roofs in the area have been changed.
Second, that when Mr Farrell inspected the roof space he found none of the sort
of red dust that he would have expected to have found if there had been severe
lamination. So far as the latter point goes, he did not find any dust at all in
the roof space because Mrs Lloyd had vacuumed that roof space and there was
nothing in that point in his inspection years after the event. So far as the
first point goes, whatever the state of the roof next door is, I still believe
Mr McDonald in the account that he gave to me of this roof.
On that basis,
here we have a roof which was leaking badly, as Mr Butler had observed; the
tiles were elderly and nearing the end of their useful life; work had to be
done both on the fillet and on the ridge and hip tiles, and in all those
circumstances, whether such works would eventually prove to be essential or
not, it seems to me that someone doing a mortgage valuation report when faced
with an old roof that has been leaking to a considerable extent should draw
attention to this so that the purchaser may investigate the matter. It seems to
me that if attention had been drawn to it in some form in the mortgage
valuation report, Mrs Lloyd would, in relation to the roof, have had Mr
McDonald in to examine the property before completion and not afterwards. I
will deal with that point in greater detail later.
One then comes
to the question of the windows in the property. As we have already seen, Mrs
Lloyd felt that she should replace the kitchen window in any event. The other
windows were part metal and part wooden. Mrs Lloyd told me that Mr McDonald
told her that the windows would not last. She accepted this advice and decided
to replace them. She said she replaced them with good, double-glazed, modern
windows, and she said that she would have replaced them quite soon in any
event. She says that if she had been told that replacing the windows was
necessary or almost necessary it would possibly not have put her off buying.
She regarded replacement as desirable but not essential.
Mr McDonald
said that in so far as the windows were wooden, they had a severe attack of wet
rot; that the front window was a very poor do-it-yourself job and he would have
advised replacement. Mr Dowdell went round the windows individually and
discovered that most of the living-room window, for instance, had rotted away —
a whole chunk of woodwork was like soft cheese and the lintel simply came away
in his hand. He found the metal windows substantially corroded and other wooden
windows with wet rot that was clearly visible in them. He felt that renewal was
necessary in those windows affected by wet rot and he felt that all the
windows, whether they needed immediate renewal or not, would require replacing
within the very near future.
Mr Butler
recognised that these windows were reaching the end of their life. Mr Farrell
said that on what he had heard repair was feasible by replacing the wood
affected by wet rot with other wood, but the trouble was that then one was back
to the original window rather than the modern, double-glazed window that Mrs Lloyd
preferred.
It seems to me
that in so far as the wet rot affected those wooden windows, effectively they
had to be replaced and that should have been listed under ‘Essential Matters’
because it had to be done. With the others it was clearly optional. The report,
therefore, should either have drawn attention to those windows where there was
effectively no choice — ie those affected by wet rot — as being specifically
done, or at least have alerted Mrs Lloyd to the danger. Because so far as she was
concerned, as she told me, even in relation to the sitting-room window, which
when tested by taking hold of it felt like soft cheese, she assumed it was firm
wood that could be worked on in the ordinary way.
In
cross-examination Mr Dowdell said that the work which would put the windows
back into as serviceable condition as the original windows would have cost
something in the region of £1,000; that is against the £3,000-odd that the new
improved double-glazed windows in fact did.
I then come to
the important matter of the woodworm. It seems to me that the woodworm should
have been found, should have been referred to in the report, and that it was
essential effectively that it was investigated. Likewise, though it is not a
very important matter, until the bay was investigated no one could know how bad
it would
and the heating.
It seems to me
that this was just not the house for Mrs Lloyd and if she had been put on
notice as to all these matters, and particularly, it seems to me, the woodworm,
she would not have proceeded with this purchase.
So far as the
woodworm is concerned, Mrs Lloyd has told me of the shock that she felt as more
and more was discovered. Mr McDonald dealt with the original discovery of it.
He had sent an electrician in to put in the power points that Mrs Lloyd wanted.
The electrician had summoned him round. He then found that the whole of the
ground floor of the house, the staircase, the first-floor landing and the whole
of the front main bedroom were heavily infested with this woodworm. Finally,
there were removed all the ground-floor floorboards with the exception of the
small area under the stairs and the joists as well. It was a marginal decision
as to whether to take the staircase out, but they decided against that. The
staircase and all the retained woods there mentioned were in fact treated.
So far as the
possible detection of this woodworm was concerned, there is some doubt as to
whether one could reasonably expect it to have been detected in the floorboards
on an inspection. The floorboards were covered by loose carpet — remnants of a
carpet and scraps of linoleum. The bulk of the infestation was underneath the
floorboards rather than on top. There is a limit on a 20-to 30-minute
walk-round of the property to the extent that it would be possible to
investigate. However, Mr McDonald made it clear — and his evidence was
confirmed by the other experts — that what the experienced man does when
looking for signs of furniture beetle infestation is to go and look at the
cupboard under the stairs, where there is usually bare wood and which is
apparently a favourite place for these insects.
Inspection of
the cupboard under the stairs — as production before me of the panel showed —
would have shown that the bottom of the panel there had bad woodworm
infestation. The moment one sees any flight holes then that is the time for
inserting a caveat in the mortgage valuation report saying that this is
something that should be investigated. When Mr McDonald went to the cupboard he
found such flight holes obvious and easy to find at a cursory glance. They were
accompanied by frass, showing that the woodworm was in fact active. He says
that those signs in the cupboard should have been found and, if found, should
have been reported on in the report. It would not have been necessary to follow
the trail to trace them down to a source or to discover the extent; that could
simply have been left to the specialist bodies which deal with the matter. What
was important was to put the lender on notice of this particular problem and
the purchaser on enquiry, so the purchaser could then take an informed view as
to whether to go ahead and not go into it without knowing of the risk.
As to the state
of affairs he saw, though a good deal of the remedial work had been done by the
time Mr Dowdell saw it, the rear floor was out, but he recalls some of the
front being there. He saw the affected boards thrown out in the garden and he
did not see an unaffected piece of timber, whether joist or board, and he
agreed that once it had been seen in the cupboard then it was necessary for
there to be a specific instruction in relation to it.
Mr Butler did
not quarrel with this reasoning. He was surprised that he had not found it in
the cupboard because it would be a place where, in the ordinary course of
events, he would have looked. He suggested that he might have missed it because
other items were in the cupboard obscuring the view. However, on the evidence,
the house had been stripped and there is no reason to think that there was
anything less in the cupboard when Mr McDonald saw it than there was when Mr
Butler saw it. I can only conclude, on the balance of probabilities, that the
signs of the woodworm were there to be seen but were not seen. They should have
been seen and having been seen they would inevitably, as Mr Butler
acknowledged, have been specifically referred to. Mrs Lloyd would have been put
on enquiry, and the enquiry would have found the actual state of affairs,
namely that the whole ground floor would need replacing.
That element
of the woodworm was, from Mrs Lloyd’s point of view, by far the most serious of
all the defects that I am here considering. In the ones that I have dealt with
up to now, namely the roof and the windows, in repairing each of those there
was an element of benefit or betterment to her. Here there was none of that, it
was all unpleasant shock and expenditure which she had not contemplated, with
only a very scant element of betterment in it and inconveniencing her by
keeping her out of her property.
I come next to
the bay at the front of the house. This, it will be recalled, had been noticed
by Mrs Lloyd in her examination of the house. When it was not commented on in
the mortgage valuation report, she assumed that it was just a matter of
redecorating the outside, which she was bound to do under the mortgage
conditions. We know in fact that Mr Butler had noticed the matter because his
contemporary notes refer to it, though he had not specifically referred to it
in the report. In fact it was not a matter of simple redecoration; it was a
matter of the bay detaching itself from the structure. This has been caused by
the corner of the bay dropping through wet rot attacking the mullion. The bay
had rolled forward causing the crack. Proper repairs to this defect would cost,
Mr Dowdell told me, between £600 and £800. However, practical repairs have been
done by Mrs Lloyd for £454 — those repairs seem to be working. While the bay
has not turned out to be a very expensive item, none the less it seems to me
that it is one — it being there to be seen — and no one could be sure how
serious it was until it was investigated. Mrs Lloyd was denied the chance of
investigating it because it was not referred to in the report, and until it was
investigated no one would know whether it was simply decorative or, if it were
not decorative, how serious it would prove to be. Happily it has proved to be
not that serious.
That leaves
the matter of the wiring and the central heating. So far as the wiring is
concerned, there was no specific reference to it in the report. Mr McDonald in
his report says that some of the wires leading to and from the fuse box in the
cupboard were of vulcanised matter and insulation was perished and peeling off.
Mr Dowdell said that all the wiring required renewal and that it should have
been in the box in the report under essential things to do. Mr Farrell said
that if a purchaser was not alerted as to the need to rewire it could be a
disaster for him. That would be particularly so if, as here, there was an
obligation to decorate internally, because if the failure of wiring was
discovered only after the internal decoration had been carried out, clearly it
would be doubly expensive for matters of this kind.
On the
evidence before me, this wiring was not only old but defective, it needed
replacement; there should have been a specific reference to it in the mortgage
valuation report.
Last, I come
to the question of the central-heating pipes. Mr Butler acknowledged in
evidence that in his reference in the report to the central-heating boiler he
would assume that he had thought that the system was capable of revival. In
fact the system was not capable of revival, in that all the pipes were rotten
and the gas board would not restore the supply until they had been mended. The
boiler had a notice on it stating that it was dangerous to use. Even on the
sort of walking tour that a mortgage valuation report includes, it seems to me
that that notice should have attracted a bit of attention which would have
shown that the defects in the system went beyond simply replacing an old boiler
with a new boiler, which was what Mrs Lloyd intended to do in any event.
So it seems to
me, though being an item closer to the margin than any of the others to which I
have referred, it is a matter that should have been referred to in some form in
the mortgage valuation report.
The next
question is: what would Mrs Lloyd have done if she had received a report
alerting her to the possibility of these defects? It seems to me that the most significant of
them is that relating to woodworm, because, as Mr Nixon says in his submissions
to me, when one is dealing with matters such as the roof and the windows, a
purchaser might well say: ‘Well, I am going to need a new roof and new windows
soon in any event, so I might have continued with the purchase
regardless.’ But the woodworm is another
thing altogether. Here was Mrs Lloyd, a single parent, aged 37, with two young
sons and a job. While she was an intrepid decorator, she had no heavy
do-it-yourself experience. The experts did not really regard this house that
she purchased as suitable for the ordinary, non-competent house-buyer. They
envisaged that the people who would be most interested in a house such as this
would be either builders who could do the work themselves at cost and then sell
it with the hope of a profit or an enthusiastic young couple,
do-it-yourselfers, who wished to get on to the housing ladder and regarded it as
an attractive proposition to take a derelict and rundown property such as this
and restore it by investing their own time, effort and skill in it. Well, that
would have been something that a childless couple could have contemplated, but
it is not something that Mrs Lloyd in her situation could have contemplated.
Besides, if the defendants’ evidence is
this a pound spent on the cost of repairs being done by a commercial organisation
would not necessarily add a pound to the value of the property.
So in all
those circumstances I am quite satisfied that if Mrs Lloyd had had the mortgage
valuation report which she should have had, referring to all these hidden
defects in the property, she would not have taken the property on; she would
not have completed.
We know that
having completed she embarked on the repairs to the roof and was a long way
into the replacement of the roof when she actually discovered the woodworm. By
then it was effectively too late to turn back and she was committed to it.
So in those
circumstances I am quite satisfied that if she had had the report which she
should have had she would not have purchased this property.
In dealing
with the criticisms that I have made of this particular mortgage valuation
report, I omitted to state what I consider to be the nature of such a report.
It is clearly not a structural survey; it is a valuation. It is taken on the
basis of an inspection which on average should not take longer than 20 to 30
minutes. It is effectively a walking inspection by someone with a knowledgeable
eye, experienced in practice, who knows where to look — I take the cupboard
under the stairs as an example–to detect either trouble or the potential form
of trouble. He does not necessarily have to follow up every trail to discover
whether there is trouble or the extent of any such trouble. But where such an
inspection can reasonably show a potential trouble or the risk of potential
trouble, it seems to me that it is necessary — at any rate, in a case such as
this with a form in the form that the Alliance’s form is — to alert the
purchaser to that risk, because the purchaser will be relying on that form. The
extent of that reliance may of course turn on the nature of the form in
question, and it seems to me that the nature of the form may make a difference
to that matter, namely, in this case the effect on Mrs Lloyd of the information
that no repairs were considered to be essential — the filling in of box 11 on this
form — because the person who relies on this form must be taken, as Mrs Lloyd
was, to be inexperienced. This is particularly so when one is dealing with
those at the bottom of the market. The filling in of box 11 with the answer
‘None’ in regard to the question of essential repairs lulled Mrs Lloyd into a
sense of false security; she believed that no further enquiries or precautions
by her were necessary. In fact substantial enquiries were necessary on this
property, and if those enquiries had been carried out she would not have
purchased the property.
All the
matters to which I have referred which should have been mentioned in the
mortgage valuation report but were not, were to some extent traps for the
inexperienced, such as Mrs Lloyd. The silence of the report as to them led her
to believe that there was nothing to worry about in relation to this property,
when in fact there was a great deal to worry about and it was very important to
her that she should have found out about these matters before rather than after
completion, by which time she was committed.
That is all I
desire to say about the facts of this case.
An order was
made for payment of £8,400 damages comprising £5,000 special damages, £2,850
interest on special damages, £500 general damages, £50 interest on general
damages and costs.
