Duncan Greenwood, professional risks partner at law firm Beachcroft, has called on the Court of Appeal to nip in the bud a series of valuers' negligence cases arising from problems in the buy-to-let market.
The case of Scullion v Colleys, due to be heard by the Court of Appeal on 23-24 May 2011, involved the buy-to-let purchase of a residential flat in October 2002.
Surveyors had valued the property at £353,000 and advised that a rent of £2,000 per month could be anticipated. In reality, rental receipts fell far short of this figure.
Having sold the property in May 2006, the borrower sued the surveyors, alleging negligent overvaluation, both in respect of the capital and rental values.
Although the judge found both capital and rental values to have been negligent, no loss flowed from the former as the borrower had paid no more than the flat was actually worth. However, he successfully recovered £72,234 in consequence of the rental over-valuation.
Greenwood says "We very much hope the Court of Appeal will overturn the original decision, as I believe that the reasoning behind it was flawed.
"The judge decided that the surveyor owed this borrower a duty of care, despite the fact that this was an entirely commercial enterprise. That was a surprising and, in my opinion, unjust extension of current third party liability principles.
"Most surprisingly of all, the amount awarded for the lost rent was far higher than expected, almost twice the level of the rental 'diminution', the judge seemingly treating the rental estimate as a warranty that the purchase would be completely self financing.
"With signs that buy-to-let investor claims are gathering momentum, a successful appeal will nip these claims neatly in the bud and save surveyors and their PI insurers significant further potential exposures.
"As the decision currently stands, surveyors are exposed to a myriad of factors well beyond their control," he said.
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