Piggybank News

June 24, 2011

Court Rules – no duty of care for buy-to-let investors

Filed under: Property — nspresources @ 12:31 pm
Tags: , , ,

In Scullion v Bank of Scotland plc (trading as Colleys) the Court of Appeal has overturned the previous ruling and stated that buy-to-let purchasers are not owed the same duty of care by the lender’s surveyor as someone purchasing a property for their own domestic use.

Mr Scullion, a buy-to-let investor, argued that he bought an investment property on the strength of a valuation commissioned by his lender.  When he subsequently found that both its value and rental income were lower than had been stated he asserted that the valuer was in breach of their duty of care.  He had previously been awarded damages in excess of £70k but the money was never paid as Colley’s launched an immediate appeal.

Marie-Louise Gobbi, the solicitor at Walker Morris who represented Colleys, said “Buy-to-let investors are not in the same position as ordinary domestic purchasers, and cannot assume they will automatically have the same rights and remedies.”

The court’s argument was that in a domestic purchase it is highly likely that the purchaser will rely only on the valuation provided by thier lender or lenders surveyor. Therefore it is right that a duty of care extends to residential owner occupiers.   However, due to the investment nature of the purchase in this case, they felt that Colley’s could not have foreseen that Mr Scullion would rely solely on its report rather than obtaining his own advice.  Their conclusion was that it was not just and equitable that Colleys should be liable to Mr Scullion because the transaction was  in essence a commercial one.

The result puts an end to speculation that those who joined the buy-to-let rush in the early 2000s, only to see their property prices plummet, would seize the opportunity to make a claim against valuers.

(Piggy says “The valuation of property provided by the mortgage company is primarily for their purposes and is limited in its scope.  Quite apart from whether it is reasonable to expect a property surveyor to be a Buy to Let expert, the report provided will often not reveal structural issues.  The best advice  is always to get a  structural survey done if there are any concerns in this regard . eg. when buying an older property)

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