In the aftermath of the property crash in Ireland, many observers anticipated an onslaught of claims against valuers alleging negligence and breach of contract in the valuation of residential and commercial property. To a large extent however, this prediction has not borne out.

The Courts have long been reluctant to allow Claimants to recover against surveyors and valuers in cases involving investment property, which of itself involves inherent risk. The Courts also recognise that property valuation is not an exact science.

These principles are demonstrated in two recent cases from the English Courts:

1.    K/S Lincoln and Others –v- CB Richard Ellis Hotels Limited (No. 2) [2010]

This case involved a claim that the Defendant Valuer had over-valued four hotels. The English High Court found that the Defendant was not negligent, notwithstanding that they had used a method of valuation which fell below the standard of care, as the valuation was within an acceptable “margin of error”.

The Court indicated that as a general principle, the permissible margin of error was:

Standard residential Property - +/- 5%

Unusual Property - +/-10%

This case makes clear that the Courts will ultimately focus more on the figures involved, and less on the methodology of the valuation.

2.    Emmet Thomas Scullion –v- Bank of Scotland plc [2011]

The English Court of Appeal recently overturned a High Court decision allowing a Buy-to-Let Investor recover against s surveyor who had been retained by the lender.

The Court found that the duty owed by a valuer instructed by a lender to the purchaser in a residential transaction did not extend to a purchaser buying a property for investment purposes.  The Court reasoned that property investors are more likely to be able to afford their own valuation and should not be entitled to rely on the lender’s valuation. English case law has confirmed that an ordinary residential purchaser buying a family home can rely on the bank’s valuer.

Another interesting point to note about the case is that the Court seemed to allow recovery for the shortfall in rent between the rental value estimated and the actual rent achievable.

Ireland? 

In Ireland no such decisions have been made by the High Court.  Remarkably the only action taken to date was the Seán Dunne counterclaim against CBRE in 2009 where he counter claimed that CBRE had overvalued the Hume House property by over €65m.  The proceedings were ultimately settled. 

Observers suggest that the reason why there has been so few actions against valuers in a country that has suffered the ultimate property bust is because of the close relationships between the banks, developers and valuers where all of them are now reliant on each other in the NAMA led work out. 

Disclaimer
This publication is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Leman Solicitors for any action taken or not taken in reliance on the information set out in this publication. Professional or legal advice should be obtained before taking or refraining from any action as a result of the contents of this publication. Any and all information is subject to change.