Mortgage lenders rely upon other professionals to verify the legitimacy of a transaction and to safeguard their interests. Unsurprisingly, the recent drop in house prices and deteriorating economic conditions have led lenders to scrutinise mortgage valuations in cases where they have repossessed properties. Unfortunately, this has brought to light a number of cases of negligence, resulting in claims against valuers.
In Platform Funding Ltd v Bank of
The lender argued that the valuer had been instructed to value 1 Bakers Yard and had produced a report certifying that he had inspected that property. It claimed that the valuer was under an unqualified obligation to inspect the property to which his instructions related and that he was in breach of contract because he had failed to do so.
The valuer accepted that he was under a duty to exercise reasonable care and skill when valuing property. He argued that he had the same duty in respect of the steps that he taken to locate the property, especially since it had been identified solely by its address.
The Court of Appeal upheld the lender’s claim. It ruled, by a majority, that the courts should exercise caution before holding that a professional person had undertaken unqualified obligations, but that there was no reason not to give effect to the language of a contract if that language was clear. It was unfortunate that the valuer would have to bear the loss, but the lender was equally blameless and was less well placed to avoid the consequences of the mortgage fraud.
The mortgage instructions issued by the lender were typical of the workaday instructions given to surveyors and valuers. However, the court found that this case was unusual. In nearly all cases, particularly those involving residential property, the identification of the property to be inspected will not give rise to any significant difficulty. It would be rare for a surveyor to inspect the wrong property without being negligent in some respect.
The case establishes that a valuer’s obligation is to go to the property that he has been instructed to inspect and value it. The scope for reasonable skill and care arises when a valuer is making his valuation. Valuers would therefore be well advised to exercise particular care, and to carry out independent checks on the identity of properties in the course of construction, in order to avoid being the victim of a copy-cat fraud.
Allyson Colby is a property law consultant
