They always say that buses are like bananas. You hang around at the bus stop for ages and then the buses all turn up together – like bunches. I think that is the way with professional negligence claims as well. Or at least case types.
Recently, I have had a lot of claims about negligent overvaluations: where someone has bought a property, got a valuation for mortgage purposes and on the strength of that valuation, obtained a hefty mortgage. Years later, often when they are in a position of negative equity, they find that the original price paid – based on the valuation report – was grossly-over inflated. In those situations the client comes to me to make a compensation claim against the valuer on the basis of negligent overvaluation. I then normally arrange for an expert valuer to give a retrospective valuation. He can look back and give an opinion as to what the correct price should have been.
If there is a difference in the price, it doesn’t mean that there is automatically a good valuer’s negligence claim though. There has been a lot of case law in the past on this subject. Don’t worry, I won’t start citing case names and quoting Learned Judges. I will go straight to the punch line by explaining that the Courts have stated that the valuer will be allowed a 10% “margin of error” before being held to have acted negligently. To give an example, if you bought a property and paid £430,000 for it but the retrospective valuation is £400,000, you probably won’t have a claim. You would have needed to have paid £440,000 or more for it to have a valid valuer’s negligence claim and overcome the 10% margin of error.
So, on to the reason for this post.
I had a call the other day from a Mr Nikolaides (not his real name, naturally) to discuss a negligent overvaluation claim. He gave me the details and in his instance, he had already obtained a retrospective valuation and the property had been over valued by the mortgage company’s valuer by as much as 21%. Just as I was about to tell him that yes, he had a great claim, he told me that the property he had bought was a “buy to let”. My heart sank.
You see, although he had overcome the “margin of error” problem, there was a case last year – and this time I will give you the name – called Scullion –v- Bank of Scotland - which has scuppered Mr Nikolaides claim. In that case, Mr Scullion did the same as Mr Nikolaides: bought an investment property to let out but the valuation obtained by the mortgage company was grossly overinflated as was the projected likely rental income. He issued a valuer’s negligence compensation claim. He won in the first court, but the valuer appealed and the Court of Appeal overturned the lower court’s decision. It said that because the transaction was “commercial in nature”, Mr Scullion could not rely on the mortgage company’s valuation.
Mr Scullion is appealing the decision and after a quick call to the Supreme Court, I found out that the appeal will be heard on the 10th, 11th and 12th December of this year which means the judgment won’t be handed down until at least March 2013.
The problem for Mr Nikolaides is that he can’t wait until next year to issue his claim as the limitation period on his claim runs out very soon. I have suggested that we issue anyway and see if we ask the Court to stay the proceedings pending the outcome of the Appeal but I can’t guarantee that they will.
I really feel for Mr Nikolaides. He is just an individual who decided that, rather than invest in a pension plan, he would invest in property. If he was buying the house for his own use, he would be able to bring a negligence claim to recoup his losses but as matters currently stand, he can’t.
Mr Nikolaides has gone away to think about what I have said and whether he wants to invest in some professional negligence litigation which we have no way of knowing which way it will go. From my point of view, I hope he does agree to go ahead as this could be an interesting ride. A bus ride perhaps!
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