The recent case of Hubbard v Bank of Scotland Plc (t/a Birmingham Midshires)  EWCA Civ 648 has provided valuation surveyors with some welcome clarification and reassurance regarding their scope of duty of care when providing a mortgage valuation.
Prior to purchasing a house, Mrs Hubbard obtained a valuation from a surveyor employed by the bank as part of her loan application. The survey was based on a visual inspection and while the report noted a crack of less than 0.1mm in width, the surveyor reported no evidence of ongoing movement and that the property wasin acceptable condition for lending purposes. Importantly, the guidance notes to the valuation stated "Youhave chosen a valuation report which is a limited inspection of the property highlighting only those itemswhich we consider will materially affect value. It is prepared…in accordance with the RICS Mortgage ValuationSpecification a copy of which is available on request" and went on to confirm the limits of a visual inspection and that "You still have the option to request a more detailed report and we would be pleased to help you with this."
Following completion of the loan, cracking was noted and underpinning works had to be carried out to the property. Mrs Hubbard raised a claim to recover her losses on the basis that the valuation failed to:
- state that the subsidence was or might be ongoing;
- advise Mrs Hubbard to seek specialist advice; and
- warn Mrs Hubbard that the valuation should be reduced very substantially because of cracking.
Decision at first instance
Mrs Hubbard's claim at first instance was dismissed, the judge concluding that the surveyor had not been negligent. There was no evidence of subsidence at the time of the valuation and the surveyor could not have been expected to predict later events. The valuation was accurate and had recommended independent advice. Mrs Hubbard appealed.
Decision of Court of Appeal
The Court of Appeal reconsidered the evidence of the parties' experts. It ruled that the limitations of the valuation were amply and clearly spelled out and that the surveyor was only instructed to advise on matters relevant to valuation, not to provide a full structural appraisal of the property. His duty was therefore more limited and he was not expected to look beyond the surface (as a structural surveyor would do). Further, there was no positive expert evidence led of anything which should have been apparent to the surveyor which could suggest ongoing movement and therefore a material effect on value. A valuation surveyor's duty when carrying out a limited valuation survey does not require him to recommend a full structural report.
As the court pointed out, to impose a duty upon a valuation surveyor who sees a small crack but no sign of ongoing movement and fails to recommend a full structural survey would in practice mean that the sale of any property displaying any cracking would be held up pending a full structural survey. No doubt, this would be much to the dismay of sellers, borrowers and lenders alike.
The distinction between the limited duties of a valuation surveyor and those of a structural surveyor proved to be an important factor in this case. While the decision is a welcome victory for valuation surveyors, all surveyors should take note and ensure that their retainers are appropriately worded.