The Court of Appeal in Scullion v Bank of Scotland Plc (t/a Colleys) has ruled that investors in the buy-to-let market are not awarded the same ‘duty of care’ by the mortgage lender’s surveyor as they would be if they carried out an independent survey.
While a lawyer could delve into the fundamentals of contract law (proximity, reliance, foreseeability, etc. . ) and the rule for the measure of damages set out in the landmark case of Hadley v Baxendale, one cannot help but wonder why Colleys' surveyor overvalued the property (both in capital value and likely rental income) by a full 50 percent. There are arguments that can be made that the lender’s surveyor only has their interest at heart and is not liable to a third-party buyer. As an aside, one would think that damages would be awarded based not only on the loss suffered and the reliance placed upon the surveyor by the borrower, but by the disproportionate percentage between the valuation and the actual value of the property.
Is it fair to say that an individual investor buying a property is more financially able to commission an independent survey than someone purchasing a property for their own domestic use and is business savvy enough to not rely upon a bank survey? It is advisable, no doubt, that in order to be completely satisfied with the results, one should seek independent advice but does this negate any liability on the part of the bank to the borrower?
It seems like a large leap to set a precedent that surveyors do not owe investors a duty of care if acting on behalf of the lender, and surely this will not be the last case dealing with the matter. The property market is on the rise, meaning that more individuals will be inclined to purchase properties for investment, many of whom may lack the 'commercial awareness' that the court has assumed that they possess.
Finally, every buyer should know that the mortgage lender's survey is not a full building survey, and that even our Fridaysmove -recommended Conveyancing Solcitors would not undertake a structural review as part of their work. Fridaysmove have partnered with the UK's best Surveyors to deliver both Home Buyers Reports and Full Structural Surveys.
If you need advice relating to mortgage lender's and building surveys, call our team on 0330 660 0286.