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Mortgage Valuer Liable to Purchaser

GDB2222
Posts: 25,703 Forumite


I thought folks might be interested in this:
Scullion v. Bank of Scotland Plc, 8/10/10
Mr. Richard Snowden QC, sitting as a Deputy Judge of the High Court, held that the negligent overstatement of both the capital value of a flat and its market rental income by a valuer engaged by a mortgage lender, entitled the purchaser to recover the difference between the price paid for it and its true value. In addition, the purchaser was held to be entitled to compensation for losses flowing from his inability to let the flat at a rent capable of providing sufficient income to cover his mortgage repayments and other outgoings in respect of the property.
Scullion v. Bank of Scotland Plc, 8/10/10
Mr. Richard Snowden QC, sitting as a Deputy Judge of the High Court, held that the negligent overstatement of both the capital value of a flat and its market rental income by a valuer engaged by a mortgage lender, entitled the purchaser to recover the difference between the price paid for it and its true value. In addition, the purchaser was held to be entitled to compensation for losses flowing from his inability to let the flat at a rent capable of providing sufficient income to cover his mortgage repayments and other outgoings in respect of the property.
No reliance should be placed on the above! Absolutely none, do you hear?
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Whoa!:eek:
Is that being appealed?
There could be a real avalanch following this, if that is the precedence set...It's getting harder & harder to keep the government in the manner to which they have become accustomed.0 -
I thought folks might be interested in this:
Scullion v. Bank of Scotland Plc, 8/10/10
Mr. Richard Snowden QC, sitting as a Deputy Judge of the High Court, held that the negligent overstatement of both the capital value of a flat and its market rental income by a valuer engaged by a mortgage lender, entitled the purchaser to recover the difference between the price paid for it and its true value. In addition, the purchaser was held to be entitled to compensation for losses flowing from his inability to let the flat at a rent capable of providing sufficient income to cover his mortgage repayments and other outgoings in respect of the property.
To quote DC, "delicious."
:rotfl::rotfl::rotfl::rotfl::rotfl::rotfl:Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0 -
Blimey.
If this isn't appealed I'd be surprised.0 -
Big report in the Observer a few weeks ago - linky0
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Fuller summary.In 2002, Mr Scullion agreed to buy a flat to let in a block in Cobham, Surrey, and applied to Mortgages for an 80% mortgage based on a £352,950 purchase price. The valuer was Andrew Collins of Colleys, now part of Bank of Scotland.
The application form for the mortgage contained in small print a disclaimer of any liability on the part of the lender or its valuer in relation to the valuation of the property. On the form, Scullion did not highlight the fact that the full price was not payable as there was a 15% discount and 10% was deferred. So the actual price was only about £300,000.
Collins valued the property in June 2002 at £353,000. He also valued the rental income at £2,000 per month. The sale continued, but Scullion was able to let the flat for only about £1,000 per month. He sold the flat for only £270,000 in 2006. He paid the lender £260,000, leaving more than £60,000 outstanding, pending the outcome of the case.
Scullion sued Colleys on the basis that the flat had been worth only £250,000 when he bought it. Colleys denied any negligence and argued that they owed no duty to Scullion and, in any event, he was prevented from bringing any claim because he had been party to a mortgage fraud.
The court held that Colleys had been negligent, as there was plenty of comparable evidence — a similar property had been sold in the same block for £290,000 in May 2002. The court held that Collins had placed undue reliance on the notified sale price — in breach of the RICS guidance notes — and had not checked other sale prices. The true value of the flat was held to be £300,000 and its rental income should have been valued at £1,100 per month.
Collins knew Scullion would rely on his valuation and would suffer loss if this was excessive
The court then held that the duty of care owed by a valuer to a commercial buy-to-let purchaser was no different from the duty owed to someone buying a home for themselves. Collins knew Scullion would rely on his expertise and valuation, and would suffer loss if this was excessive.
The disclaimer of liability did not protect Colleys as it should have been well within its expertise to carry out a routine valuation. The disclaimer was never highlighted to Scullion and while he was liable to suffer significant loss due to its negligence, Colleys was insured against this risk.
The court did not think Scullion acted dishonestly. Other parties had negotiated the terms of purchase on his behalf and his conduct was inconsistent with trying to keep information from the lender.
Although Scullion won on all issues in relation to liability, the fact that he had paid only £300,000 for a property found to have been worth the same caused problems in relation to recovering damages. Colleys could not be held liable for a fall in the market that led to the property selling for £270,000 so, as Scullion did not overpay, its only liability was for the costs he incurred in having to service the mortgage and pay outgoings due to the shortfall in rental income. All concerned are out of pocket.0 -
If upheld it will lead to lenders getting even tighter on valuations and could lead to further price falls.0
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lemonjelly wrote: »Whoa!:eek:
Is that being appealed?
There could be a real avalanch following this, if that is the precedence set...
It doesn't look that much of a precedent to me. It's the principle from Hedley Byrne v Heller, which really was a precedent (-:...much enquiry having been made concerning a gentleman, who had quitted a company where Johnson was, and no information being obtained; at last Johnson observed, that 'he did not care to speak ill of any man behind his back, but he believed the gentleman was an attorney'.0 -
neverdespairgirl wrote: »It doesn't look that much of a precedent to me. It's the principle from Hedley Byrne v Heller, which really was a precedent (-:
But I always put in my report that it is for the use only of my (named) clients and what the purpose of the report is, and I then say that I do not accept liability to any other parties or for any other purpose. (Everybody does that, ever since Hedley Byrne.) I assume that the unfortunate surveyor in this case did too. The surveyors went one stage further, because they covered this in their terms of engagement, too. The point in this case was that the surveyor was acting for the lenders, although the fee was paid by the borrower. Even so, the court found in favour of the borrower. You don't think that's a big deal?No reliance should be placed on the above! Absolutely none, do you hear?0 -
This wasn't a domestic house-as-home purchase but a business purchase. Regardless of the Court's wittering on about there being no difference between a domestic buyer and a property speculator, I don't see why any speculator has to be protected against the risk of what might befall as a consequence of not doing his homework for himself. I hope the decision is appealed.0
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