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Court rejects professional negligence claim against surveyor

The High Court has rejected a claim by a bank that that a surveyor had been negligent when valuing a property.

The case involved a Grade II listed building that was being used as a 17-bed care home.

In 2007, the bank loaned £250,000 to a couple to buy the property as a going concern with a 40-year lease. The bank made the loan on the strength of a £350,000 valuation by a surveyor.

In 2011, the business failed and the bank forfeited the lease. It then claimed that the valuation was negligent and sought to recover its losses from the surveyor. The surveyor denied negligence, claiming that its valuation fell within an acceptable margin of error.

At trial, the bank's expert provided a valuation of £130,000 while the surveyor maintained the £350,000 valuation.

The court found in favour of the surveyor. It held that the valuation had been carried out in accordance with the Royal Institute of Chartered Surveyors appraisal and valuation standards.

In negligence cases, the appropriate margin of error would depend upon the facts. In general terms, 5% was appropriate for a standard residential property, 10% for a one-off property, and 15% if the property had exceptional features, as with this listed building.

The valuation was challenging because there were a very limited number of comparable properties and there were features of the building that were idiosyncratic. A 15% margin of error was therefore appropriate.

After hearing evidence from independent experts, the court assessed the correct value of the property at the date of valuation at £330,000. The surveyor’s valuation was therefore within the permitted margin of error and was not negligent.

Please contact us if you would like more information about the issues raised in this article or any matter relating to professional negligence claims.