Does a valuer acting for a lender owe a duty of care to the buy-to-let borrower? A recent case concludes that the surveyor does owe such a duty. In doing so, the court has dramatically extended the scope of liability in negligent surveyor cases. 


In Smith [1990] it was made clear that a valuer who was instructed by a lender owes a duty of care to the buyer of residential property at the lower end of the market (ie modest purchases for owner-occupation). Since then, there have been several cases that have confirmed that principle, and made it clear that such liability does not attach where there has been any hint of commerciality in the purchase arrangement. Surprisingly, it has now been held that this principle should also be extended to buy-to-let purchasers, of lower-end, properties – provided the property is not being bought by a professional property developer. 


What happened was that a buy-to-let ‘investor’ bought a property for £300,000 (although it was declared to the lender at £353,000). The lender obtained a valuation from surveyors which confirmed the £353,000 price, and said there was a rental value of £2,000pm. In fact, the buyer was only able to let at £1,050pm, which meant that he fell in arrears – with the property eventually being sold for £270,000. The buyer then sued the surveyors for negligent over-valuation. The judge held that a duty of care was owed to the buyer; whilst the buy-to-let investment is very different from that of an ordinary residential purchase, it was even more critical to such an investor to be sure that the investment was sound (ie that the rental income would fund the mortgage payments). In the judge’s view, everyone involved knew that the buyer was a buy-to-let purchaser and should have known that he would be relying on the valuation report in deciding whether or not to buy the flat. The end result was a damages award of £72,000 in respect of the rental income (there was no award in respect of the capital value since, in the judge’s view, the property had been worth £300,000 at the time of purchase). 


This is the first case in which a buy-to-let investor has recovered damages from a lender’s surveyor. In view of the massive growth in the buy-to-let mortgage market over the last decade, this decision could give rise to huge numbers of claims from aggrieved property investment clubs and private investors; not surprisingly, it is being appealed. Scullion v Bank of Scotland [2010] EWHC 2253 (Ch) (access free at www.practicalconveyancing.co.uk). Source: Beachcroft.