Valuation – Breach of duty of care — Damages – Defendant’s surveyor valuing property for mortgagee buy-to-let transaction – Claimant purchasing property in reliance on valuation and estimated rental figure – Court finding defendant owing claimant duty of care – Whether claimant entitled to damages in respect of inaccurate capital and rental valuations – Claim allowed in part
In 2002, the claimant purchased a two-bedroom flat from a developer on a buy-to-let basis. He sought finance from a specialist mortgage provider (M). The application form stated that the purchase price/estimated value of the property was £353,000, and the claimant applied for a mortgage of £283,000. The defendant was a firm of surveyors and valuers. The surveyor responsible for the valuation of the property (C) had provided M with a valuation report that assessed the open market value of the property at £353,000 and the achievable rent at £2,000 pcm. The claimant’s monthly mortgage payment was just under £1,440 pcm.
Following completion of the purchase, the claimant’s rental income was one-half of the monthly amount that C had predicted. He subsequently sold the property in May 2006 for £270,000.
The claimant sought damages for the loss suffered as a result of C’s alleged overvaluations. The court found that, having regard to appropriate comparables, a competent valuer would have valued the property at £300,000, with a permissible bracket of between £270,000 and £330,000. Furthermore, if he had sought information from local letting agents, that valuer would have advised that the property would expect to achieve a rent of around £1,100 pcm, with an upper limit of around £1,350. Accordingly, C had acted negligently in overstating both the capital value of the flat and the expected rental income: [2010] EWHC 572 (Ch); [2010] PLSCS 89.
At an adjourned hearing to determine quantum, the claimant argued that he was entitled to damages to reflect the fall in the value of the property between the date on which it was purchased and the date on which it was sold, namely £30,000.
Held: The claim was allowed in part.
Rules that made a wrongdoer liable for all the consequences of his wrongful conduct were exceptional and had to be justified by some a policy. The law usually limited liability to consequences that were attributable to that which made the act wrongful. In the case of liability in negligence for providing inaccurate information, that meant liability for the consequences of such information: South Australia Asset Management Corp v York Montague Ltd [1996] 2 EGLR 93; [1996] 27 EG 125 (SAAMCO) applied.
The claimant could not recover compensation for any fall in the value of the flat that was caused by market movements in the period between its purchase and sale. The purpose of C’s valuation and, hence, the scope of his duties, did not extend to advising the mortgage lender, still less the claimant, as to the wisdom of entering into the transaction generally or the possibility that the market value of the flat might fall after purchase. Moreover, since this was a claim in tort and not under a contractual warranty, the claimant could not recover compensation for any loss of capital profits that he might have expected to make on selling the property.
However, he was entitled to recover damages for the losses caused by his inability to let the flat for a rent that provided him with sufficient income to cover his mortgage payments and the other outgoings on the property. The importance of the rental value was clear: M had made it a condition of its mortgage offer that the estimated rent should exceed the payments due under the mortgage by a specified margin that C knew or ought to have appreciated. There was no reason why the scope of C’s duties to the claimant and of his recoverable losses ought only to be restricted to one element of the valuation report.
Thus, because of the SAAMCO limitations on the scope of duty assumed by C, together with the court’s findings as to the true value of the flat in 2002, the only losses for which the claimant was entitled to recover damages against C were those that flowed from the negligent overstatement of the anticipated rent. However, there was no suggestion that the claimant had done anything to cause or contribute to those losses. Accordingly, it was not appropriate to reduce the claimant’s damages on account of contributory negligence.
C would be ordered to pay the claimant damages for negligence in the sum of £72,234.54 together with interest at a rate of 6% pa.
Philip Noble (instructed by Miller Rosenfalck) appeared for the claimant; Tom Leech QC (instructed by Walker Morris) appeared for the defendant.
Eileen O’Grady, barrister