Pictured above: Marcus Brown
An Appeal Court ruling means buy to let landlords can no longer
rely on property valuations carried out on behalf of mortgage
lenders. Marcus Brown of Nottngham based Andersons Solicitors looks
at the implications.
Many landlords buying a new property rely on the valuation
carried out by the surveyor acting on behalf of the mortgage
lender.
Until now they have been reasonably secure in doing so because
the law accepted that these surveyors owed a duty of care to the
purchaser. It meant that if the valuation was way out, the
purchaser would have a legal comeback against the surveyor.
This principle was established in the case of Smith v Bush in
1990. The reasoning then was that the purchaser was effectively
paying for the valuation and so was entitled to rely on it, even
though it was being carried out primarily for the lender.
However, the Court of Appeal has now ruled that this principle
only applies when the purchaser is an ordinary householder buying a
home to live in. It doesn't apply to buy to let landlords who to
rent out a property.
The issue arose when landlord Emmet Scullion bought a property
he wished to let out. The mortgage lender engaged a firm of
surveyors who provided a report on the value of the property and
the monthly rent that could be achieved.
The landlord relied on these figures but they turned out to be
over optimistic. The rental value didn't even meet the cost of the
mortgage repayments.
The landlord sold the property four years later at a loss and
sought damages from the surveyors claiming they had been
negligent.
The case went all the way to the Court of Appeal which ruled
against the landlord. It held that people who bought properties to
let were likely to be richer and more commercially astute than
owner occupiers, and would be able to afford an independent
valuation.
They could not therefore bring a negligence claim in the same
way as an ordinary householder.
The court also held that a valuer in these circumstances would
expect a prudent buy to let purchaser to obtain his own advice
about issues such as how easy it would be rent out the property,
the rent that could be achieved and other terms or fees that would
need to be agreed.
The ruling may seem a little harsh but means landlords will need
to commission their own surveys if they want to be legally
protected in future.
For more information please contact Marcus Brown directly on
0115 988 67 or email mbrown@andersonssolicitors.co.uk