Nelsons law firm says down valuations have become more common as a result of uncertainty in the housing market
Down valuations could leave some surveyors liable to professional negligence claims, a law firm says.
Nelsons law firm says down valuations have become more common as a result of uncertainty over the future direction of the housing market, especially when the current stamp duty holiday ends.
Establishing whether a valuation was negligent and what losses can be claimed is not a straight-forward process. It’s not simply the prevalence of the down valuations that’s an issue, but the scale of the difference, which has – in some cases – been as much as 20 or even 30 per cent, explains Sam Robinson from the firm’s dispute resolution team.
The question such large discrepancies raise is whether properties are being correctly valued by surveyors. If not, it may be that buyers and/or mortgage providers will find that they acquire a substantially less valuable asset than they had been led to believe. In some circumstances, the discrepancy may be such that the surveyor’s conduct is negligent, and they could be held liable for the losses sustained as a result, Robinson contends.
The courts appreciate that valuations aren’t an exact science and, therefore, it’s to be expected that valuations will differ, sometimes considerably. A valuation will only be potentially negligent if it falls outside of the ‘margin for error’, he says.
He continues: The breadth of the margin for error depends on the facts of the case but is normally somewhere in the region of 10 per cent, although it can be higher or lower in certain circumstances. It’s not yet been established whether the uncertainty created by the coronavirus pandemic may, in itself, widen the margin for error.
In relation to lenders where borrowers have defaulted, the damages claimed will depend on a number of factors, particularly whether, had the valuation been correct, the lender would have loaned in the first place.
