Mortgage — Open market value — Loan made to homeowners relying on valuation — Fall in property market — Repossession — Lenders seeking to sell property — Property sold at low figure — Lenders alleging defendant valuers made negligent overvaluation for purposes of loan — High Court holding that impugned valuation within proper bracket of valuation — Judgment for defendants
The plaintiffs were in the business of lending money to private borrowers, who wished to purchase their own homes. In 1988 B and his wife applied for a loan to remortgage their leasehold flat at 9 Lewes Crescent, Brighton. Initially the loan was for £93,750. The plaintiffs instructed the defendants, a local firm of estate agents, to value the property. They gave a written valuation of £155,000 for mortgage purposes on an open market basis. The plaintiffs claimed that they had advanced sums to B totalling £108,500 relying on that valuation. Those sums were secured by way of mortgage over the property. The borrowers later defaulted on the mortgage payments and the plaintiffs obtained possession of the property in 1991. When they obtained further valuations it was said to be worth only about £75,000-£80,000 on a forced sale. It was eventually sold for £75,000. The plaintiffs claimed that the defendants had negligently overvalued the property in September 1988 and brought a claim seeking damages.
Held Judgment was given for the defendants.
1. The proper approach in deciding whether a valuation was accurate was to ask where the proper bracket of valuation lay; and then whether the impugned valuation lay within a permissible limit of that bracket: see Mount Banking Corporation Ltd v Brian Cooper & Co [1992] 2 EGLR 142.
2. The present case was not one where a valuer could have had access to any true comparables, so that a greater than usual element of informed estimation was required. Further, it now transpired that the defendants were required to make their valuation at the very peak of the property market. At such a time it was particularly necessary to exercise caution, but two equally competent valuers might well have different ideas about the degree to which such caution should affect the open market value of the property.
3. In all the circumstances of this case, although the valuation of £155,000 was at the very top of the bracket it did come within a proper bracket of valuation. Therefore, the plaintiffs’ case of negligence had not been made out.
Nigel Thomas (instructed by Vizards) appeared for the plaintiffs; Christopher Gibson (instructed by Davies Arnold Cooper) appeared for the defendants.