Valuers Negligence

In the case of Paratus AMC Limited (1) (2) RMAC 2005 NSI PLC & Countrywide Surveyors Limited [2011] EWHC 3307 (Ch) the Claimants alleged that Countywide had negligently overvalued a property. In July 2004, Mr. Stockton sort to re-mortgage his property at Fulford Place in York. He made an application through his mortgage broker who were then known as GMAC. In the application Mr Stockton stated that the property was worth £184,000 and he made an application for a 10 year interest only mortgage. He stated that he had originally purchased the property in September 2003 for a price of £166,500 and he had put an estimated value on the property of £185,000.

The broker instructed Countrywide to provide a mortgage valuation report and inspection of the property. Countrywide were instructed to advise on the open market value of the property between a willing seller and a willing buyer at arms length, as to the nature of the property and any factors that were likely to have a material effect on its value, its reinstatement costs as to its insurance purposes and as to whether the property constituted an adequate security for the advance of the money by GMAC by way of residential mortgage.

A Countrywide surveyor attended the property in July 2004 and provided a report. The report confirmed that the property was suitable security for mortgage purposes and had a market value of £185,000.

GMAC on the 12th August made a mortgage offer to the borrower of £166,500 and £395 in respect of its fees. The offer was accepted and the advance was made on the 30th September of £166,430.

The borrower fell into arrears in late 2007 an Order for Possession was obtained by GMAC in September 2008 who then sold the property for £123,000 after various fees were deducted GMAC received £118,103.20.

The issues to be determined in this Valuers Negligence claim :

1) What was the value of the property in July 2004?
2) Was the valuation of the property negligent?
3) Had either GMAC or RMAC suffered a recoverable loss?
4) Should the order of damages be reduced on account of contributory negligence?

What was the value of the property in 2004?

The court held that the market value of the property was £175,000.

What was the acceptable range of values?

The Claimants argued that it should be plus or minus 4% the defendants argued for a range of 11.4%. The court found that an acceptable margin was 8% which gave a range of between£160,000 and £190,000.

Was the Valuation Negligent?

The original valuation was £185,000 so it therefore fell between the region of £160,000 and £190,000.

In a discussion as to the scope of the duty the court stated that consideration had to be given as to the amount of remuneration paid to the valuer.

  • “The fee sets some parameters as to what is to be reasonably to be expected.” In this particular case it was found that the value was not required “to make enquiries of developers who have completed developments and moved on” and as to the investigation of areas “would in my view only be credible if values correlated with areas”. The implication is that the extent and scope of the retainer will have some affect on the extent of the investigation to be carried out by the valuer.

The court therefore dismissed the claim.

The judge then went on to consider whether or not the claimant was contributory negligent. The court found that they were. The fact that they had lent 90% was not in itself imprudent but they would have a duty to investigate the circumstances of Mr Stockton, on that basis and for failing to do so if the valuation had been negligent then they would have reduced the claim by 60%.

The judge adopted Coulson J’s approach in K/S Lincoln [2010] he found the margin to be plus or minus 5%, the judge in this case extended it to 8% having regard to local factors.

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