News

January 2012

Current trends in negligence claims against valuers

In December 2011 GMAC lost a High Court claim for negligent valuation against Countrywide Surveyors on the basis that although the valuation of the property was high, it was not negligently high. Paratus AMC (GMAC)–v Countrywide Surveyors [2011] EWHC 3301 (Ch).

The judge, His Honour Judge Keyser QC sitting as a High Court judge, found that 8% was the applicable margin of error for this particular property in the market circumstances applicable at the time. He referred to the dictum of the TCC decision of His Honour Judge Coulson QC in K/S Lincoln and others v CB Richard Ellis Hotels Ltd [2010] EWHC 1156 where he set out the position of general principle to be taken from the authorities as follows:

(a) For a standard residential property, the margin of error may be as low as plus or minus 5%;
(b) For a valuation of a one-off property, the margin of error will usually be plus or minus 10%;
(c) If there are exceptional features of the property in question, the margin of error could be plus or minus 15% or even higher in appropriate cases.

The judge indicated that he preferred to begin from a range of acceptable valuations based on the expert evidence of the parties’ respective experts, and from that he calculated the acceptable margin in this case at 8%. In arriving at a margin of 8% for the property he rejected an arithmetical method of valuation and preferred an exercise involving assessment of numerous facts. The judge took a predominantly artistic rather than ‘pseudo-scientific’ approach. He made the following comments in this case:

(i) A 10% bracket will necessarily result in a relatively wide range of monetary figures;
(ii) the comparable evidence for the property lacked consistency and clarity, even though this was flat in a development of purpose-built flats completed in stages in the preceding year;
(iii) the market was buoyant, even volatile, at the time (July 2004) and the market was still rising after a very substantial rise in the preceding years.
(iv) The general buoyancy of the market was heightened, in this particular development, in the summer of 2004 as the glut of desirable properties which had been available in 2003 was over and the opportunity to buy one was by then more limited.

The above factors presented the valuer with difficulties that would not exist in a stable market. The judge took the view that this justified a margin of error of 8% which is greater than might otherwise be expected in the case of a property in a block of modern residential flats. The actual valuation, although high, was not negligently so, being at the higher end of the 8% margin of error.

Glovers Solicitors LLP act on numerous surveyor negligence claims, mainly for lender Claimants for negligent over-valuation. Whilst it is a first instance decision, this case is will be a useful benchmark.

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.

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