In this chapter of our Annual Insurance Review 2020, we look at the main developments in 2019 and expected issues in 2020 for surveyors.
Key developments in 2019
The recent unreported case of Ryb v Conway Chartered Surveyors highlights the importance for surveyors in being able to recognise Japanese Knotweed. In this case, the surveyor, carrying out a building survey, advised that the property was in an excellent condition. The purchaser, Mr Ryb, subsequently identified Japanese Knotweed in the garden and paid some £10,000 for it to be removed. He then brought a claim in negligence against the surveyors and was awarded £50,000 in damages, including for diminution in value.
Importantly, the case indicates that a surveyor's duty of care may extend to cover the grounds of a property as well as the property itself. Surveyors should ensure they have undergone sufficient training so that they can competently recognise Japanese Knotweed. Further, having not taken any photographs of the garden, the surveyor had no evidence with which to support an argument that the plant was not clearly visible – another reminder of the importance of keeping adequate photographs and notes of any inspection.
Perhaps most interestingly, in arriving at a figure for diminution in value, the Judge applied a number of elements to establish the impact the plant would have on market value of the property, including: desirability of the property (generally the more desirable, the lower the impact); use of the affected land; and risk of spread.
The Royal Institution of Chartered Surveyors (RICS) is due to consult on an amended guidance note for surveyors in early 2020. It has also produced a new Home Survey Standard, which was launched on 18 November 2019 and which comes into force in April 2020, to give greater clarity to all RICS surveyors as to what they should cover in their surveys and in their terms and conditions. It will be interesting to see what effect these two developments have on the number and nature of claims faced by surveyors relating to Japanese Knotweed. If they follow the guidance, it is hoped that surveyors should have a robust defence in the event that any claim is made.
What to look out for in 2020
Whilst we await the outcome of the RICS's consultation on its new guidance note on Japanese Knotweed, another 'one to watch' in 2020 is the potential for an increase in claims arising from peer to peer lending.
The difficulties in accessing finance since the economic crisis, and the reduced number of lenders willing to make loans at a high loan to value ratio has led, in recent years, to a rise in peer to peer lending, providing access to finance for borrowers without going to the bank. Significantly, many of these peer to peer loans are at the 'subprime' end of the market. Unsurprisingly, this has led to a concern amongst surveyors and their professional indemnity insurers that their valuation reports and surveys could be relied on by multiple investors in the particular lending scheme, with whom the surveyor has had little or no contact, thereby leading to multiple claims arising from one report.
As always, surveyors should keep the scope of any standard reliance clause used in their reports under close review and as limited as possible.
Although prudent for Insurers to keep an eye on any such development, were multiple claims to be brought against a surveyor arising out of just one report, we anticipate that the courts would apply the doctrine of reflective loss, to prevent the surveyors facing the risk of liability to multiple parties, adopting the same approach as the Court of Appeal did in the case of Titan v Colliers, in connection with securitised lending.