Valuer's duties to borrower clarified

Traditionally if your mortgage lender instructs a valuer to value a property you intend to buy, the valuer only owes a duty of care to the lender and not to you.  That is to say, if the valuer gets it wrong then only the lender, and not you, can do anything about it.

However, in the recent case of Scullion -v- Bank of Scotland plc, the courts have decided that in some circumstances the valuer is liable to the borrower too!

In that case, the buyer of a buy-to-let property suffered a significant loss because the bank's valuer had overstated the value of the property and how much rent the borrower could expect to receive.

The judge said that he had taken into account the following factors :-

1.  That the property was a residential property and not a high value house or commercial property where it might be expected that the borrower would have had a separate survey carried out.

2.  The valuer was a professional valuer who should have known that the borrower would have seen the valuation and would have relied on it.

3.  The borrower was not a professional developer and was no different in that respect from the purchaser of a residential property to live in.

The court awarded the borrower the sum of £72,000.00 to compensate him for the fact that he was not able to let the property for an amount sufficient to cover his mortgage payments.

This is good news for the first time or infrequent property investor whose resources may not stretch to having costly surveys and valuations carried out on standard residential properties, but shouldn't be relied on by professional developers or investors whose resources (and experience) are not limited in the same way.

Celebration time for Estate Agents?

The Department for Business, Innovation and Skills has announced that it is to consult on a proposal to repeal the Property Misdescriptions Act 1991. (

Under the Act it is an offence for an estate agent to make any statement (usually in the sales particulars) which would mislead a potential buyer or which is simply untrue.

 

The Act covers matters such as location, views from the property, measurements and size of rooms and garden and structural matters.

There is therefore a considerable degree of overlap between the Act and the Regulations - and indeed the powers of Trading Standards under both are very similar.

This has lead to calls for the Act to be scrapped and for customers of estate agencies to rely on their rights under the Regulations instead.

However, whilst the two sets of rules do indeed provide similar protection to consumers, it should be stressed that the protection is not identical, and added to which there has been, over the years, a considerable amount of case law flowing from the Act which gives Trading Standards and the Courts a degree of guidance as to the interpretion of the Act which simply is not available under the Regulations, given that they are relatively new.

We can only hope, if the Act is repealed, that Trading Standards and the Courts will continue to apply the same standards of enforcement which have been available to consumers under the Act.  If not, the days of "compact and bijou" may make a return!

If you would like to have your say on the consultation, it is open until 5th April 2011

If you'd like to comment on this or any of the other posts in the blog, just type it into the box below the relevant post and click the " Post Comment" button.

Council Tax on Houses in Multiple Occupation

The High Court has just decided (in the case of R (Goremsandu) v London Borough of Harrow)  that the landlord of a house in multiple occupation (HMO) was not liable to pay council tax to the local authority and that the liability remained with the tenants.

 

Given that many local authorities have been actively pursuing landlords for the payment of council tax where tenants have failed to pay, there will be many investors this morning heaving a sigh of relief!