Claiming Damages for Surveyor's Negligence
Whilst for most people buying their own home will be the biggest financial transaction of their lives it is surprising to find that many purchasers do not employ a surveyor to check out the property for them especially as it is well known that English Law operates on the caveat emptor principle (i.e. let the buyer beware!)
To whom is a duty owed?
If a purchaser instructs a surveyor directly to carry out a survey on his behalf the surveyor will owe the purchaser a duty of care both in contract and in negligence. The precise duty will usually be defined by their agreement but generally if the surveyor has been negligent establishing that he owed a duty of care will not be a problem.
However in the vast majority of cases the purchase will be financed by a mortgage and often the lender will require a surveyor to carry out a valuation which will be paid for by the borrower. Many purchasers do not obtain any other report from a surveyor.
However the mortgage "survey" is usually only a valuation and therefore far less extensive than a survey carried out for a purchaser. Nevertheless the surveyor is expected to identify major problems that affect the value and will be liable to the lender if he negligently fails to do so.
Even though there is no direct contractual link between the purchaser and the surveyor in this situation, in 1990 the House of Lords in the linked cases of Smith -v- Bush and Harris -v- Wye Forest District Council decided that the surveyor did owe the purchaser a duty of care.
The House of Lords, which was very much influenced by public policy considerations, decided it was not unreasonable for a purchaser of a "modest house" to rely on the valuation and also decided that the attempt by the surveyor to exclude liability by notice and/or contractual terms failed as being unreasonable.
More recently, in June 2011, an attempt was made to extend this duty to cover a buy-to-let investor (Scullion -v- Bank of Scotland PLC).
Mr Scullion relied on a valuation obtained by his mortgagee when buying a buy-to-let property. The court found the valuer had been negligent. Although Mr Scullion was successful at first instance the Court of Appeal overturned the decision deciding that Smith-v- Bush was at the outer limit of what was justifiable legally and that a surveyor did not owe a duty of care to an investor/purchaser (except perhaps in cases where the surveyor had particular knowledge that the purchaser was relying upon him and for example was an inexperienced and unsophisticated investor).
Interestingly the court did accept that a property valued at £300,000 should still fall within the "modest house" description in Smith -v- Bush.
Consequences of a surveyor's negligence
If a duty of care is established then it will be necessary for the purchaser to show that the surveyor breached that duty. Whilst in some cases that may cause problems, in many instances e.g. where the surveyor failed to spot major defects, this will not be too difficult.
If a breach is established it is then necessary to show that the breach caused a loss and to quantify that loss. This may be significantly more difficult than many people would assume.
Suppose for example the surveyor failed to notice a major defect in the property and the purchaser now has estimates to correct the problem demonstrating it will cost £50,000. Many people wrongly assume they will be entitled to claim £50,000 (i.e. the cost of repair) from the surveyor.
This is not correct. The Courts have held that a surveyor who has been negligent is not liable to pay the cost of the repair (as this would in effect mean the surveyor was guaranteeing the property). The surveyor is only liable in damages for the "diminution in value". This means the difference between what the property was worth if the defect had not existed and what it was worth with the defect.
In many cases this will be less than the cost of repair and may even be negligible.
The calculation of damages is usually complex and particularly difficult questions can arise where for example, the purchaser might not have proceeded if he had been made aware of the defect and, since the purchase, there have been substantial falls in property prices.
Conclusion
Compared with the cost of buying a property, the cost of commissioning a surveyor to advise on condition and value is relatively small and may well be recovered in negotiations with the vendor if items of repair are found.
If instead the purchaser simply relies on a valuation carried out for a mortgagee, whilst in some circumstances the surveyor may owe a duty of care this is likely to be far less certain and far more likely and particularly in the case of expensive or investment property there may well be no duty at all.
Finally it is vital when considering bringing a claim against a surveyor who has been negligent to seek experienced and specialist legal advice as the area is highly complex.
For more information on the above or for advice please contact the litigation department on 020 7354 3000 or e-mail enquiries@colmancoyle.com
Date published: 9th September 2011