LEGAL
Buy To Let Landmark decision
The Court Of Appeal rules – it’s goodbye to valuation claims for Buy To Let properties, says legal expert Helen Stead.
T
he Court Of Appeal has ruled that buy-to-let purchasers are not owed the same duty of care by the lender’s surveyor as someone purchasing a property for their own
domestic use. This was the finding in Scullion v Bank
of Scotland PLC (trading as Colleys [1]), which has major implications for buy-to- let purchasers, valuers, lenders and insurers. The result puts an end to the anticipation that those who joined the buy to let rush in the early 2000s, only to see property prices plummet, would seize the opportunity to claim against valuers. Marie-Louise Gobbi, the solicitor at
Walker Morris who represented the valuer, said, “The Court of Appeal’s judgment clarifies the extent of the duty owed by valuers in buy-to-let situations. The decision is good news for surveyors, and provides a clear basis for resolving similar claims brought in the buy-to-let sector. Buy to let investors are not in the same position as ordinary domestic purchasers, and cannot assume they will automatically have the same rights and remedies. The case also provides crucial guidance on the calculation of damages in rental overvaluation cases.” In the case, Mr Scullion had purchased
a buy to let property, valued for the lender by Colleys. The rental obtainable was only £1,050 per month, compared to the £2,000 stated by Colleys, and the property was subsequently sold. Mr Scullion claimed Colleys had negligently overvalued both the capital value and likely rental income, and that he had relied on these valuations when deciding to purchase. When the case first went to trial Mr
Scullion was awarded damages of £72,234 based on the negligently high rental value – no damages were awarded in respect of the capital valuation which had not caused any loss. Fundamental to Mr Scullion’s case
60 SEPTEMBER 2011 PROPERTYdrum The Court
decided that the BTL transaction was commercial in nature.
was the assertion that Colleys owed him a duty of care. However, the valuer appealed and the Court of Appeal overruled the decision on the basis that the transaction was commercial in nature. The reasoning being that in ordinary
domestic purchases it is highly likely that the purchaser will rely on the valuation and that if it is incorrect they may suffer losses. Therefore it is right that the duty of care extents to the ultimate purchaser – ie the modest residential owner-occupier.
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