Valuation report for purpose of mortgage — Negligence claim by mortgagee — Correct approach to valuation as at date of report — Whether justifiable to devalue from current value based upon increases in house prices since report date — Claim dismissed
The claimant mortgagee instructed the defendant firm of surveyors to value a residential property for mortgage purposes. The defendant valued the property, a converted chapel near King’s Lynn, at £64,000 as it then stood, or £65,000 after essential repair work to remedy a rising damp problem. It also gave an estimated restricted-realisation price of £50,000, based upon achieving completion within 60 days. At that time, the property was attractively presented, and the defendant was unaware that it had no electricity, water or foul drainage. The claimant made an advance of £55,432 on the basis of the valuation.
The mortgagor fell into arrears and, in April 2000, the claimant recovered possession of the property. By that date, the property had fallen into disrepair: there was substantial damp and mould, various fittings had been removed or damaged, and the property remained without electricity, water or foul drainage. The claimant carried out repairs and improvements in excess of £26,000 to make the property saleable, and sold it for £59,995 in May 2002.
The claimant brought a claim against the defendant for negligent valuation. It conceded that the defendant could not be blamed for failing to appreciate that the property lacked electricity, water and foul drainage and it did not challenge the methodology by which the defendant had reached its valuation. However, it relied upon the disparity between the defendant’s valuation of £64,000 at the time of granting the mortgage, and that provided by its own expert of around £35,000, as being sufficient to show negligence. Reference to the nationwide house price index was also used to devalue the later valuations and sale price by reference to the increases in house prices that had occurred over the period since the defendant’s report.
Held: The claim was dismissed.
It was a misuse of hindsight to fix a value as at an earlier date by devaluing from a later valuation. A retrospective valuation had to be based upon information available at the relevant date. A valuer considering an earlier valuation undertaken by another should put himself, as far as possible, in the position of that other valuer at that time. The valuer was not entitled to verify his retrospective valuation by reference to prices obtained for similar properties after the date of the original valuation: South Australia Asset Management Corporation v York Montague Ltd [1996] 27 EG 125; [1996] 2 EGLR 93 and Halifax Mortgage Services Ltd v Simpson (1998) 64 Con LR 117 applied. Clear, cogent evidence would be required for a devaluation based upon rising house prices. A reference to the nationwide house price index was insufficient, as it applied to the whole of East Anglia and the average trend over such a large area might be wholly inapposite when applied to the village in question. The devaluation process, even if valid, would have been difficult to achieve given the changed state of the property on repossession and then following the works of repair and improvement. Furthermore, the devaluing exercise would have had to factor in an allowance of up to 30% for blight to take account of the fact that the property was a repossession. The claimant’s expert had erred in his approach to the valuation; he had reached his low basic valuation of the property as at November 1998 based on subsequent events.
The property was unusual with no direct comparables. Accordingly, the “tolerance” or “bracket” of acceptable valuations was wide, and a margin of 15% was justified. On the basis of the defendant’s expert evidence, the correct valuation for the property as at November 1998 was £57,000, which was to be taken as the median point of the tolerance bracket. The defendant’s valuation fell within that bracket, and was not therefore negligent. Even had it lain just outside the bracket, on the facts of the case the court would still have been satisfied that the defendant had exercised an appropriate degree of care, skill and competence. Accordingly, the claimant had not established any cause of action against the defendant.
Grant Crawford (instructed by Clarke Willmott, of Southampton) appeared for the claimant; Thomas Grant (instructed by Beachcroft Wansbroughs) appeared for the defendant.
Sally Dobson, barrister
