A recent High Court decision appears to have extended the duty of care which a valuer engaged by a lender owes to a buy-to-let investor. As a result any investor landlord who was given poor valuation advice when purchasing property may now be able to bring a claim against the valuer for the losses suffered.

In Scullion v Bank of Scotland plc (t/a Colleys) [2010] EWHC 2253 (Ch) the claimant Mr Scullion decided to enter the buy-to-let market to supplement his pension. He bought a new build flat in Cobham, Surrey in 2002 with a view to let it initially to cover his costs and in due course to sell it on for a capital profit. Colleys were engaged by Mr Scullion's lender, Mortgages plc, to value the flat, but, as is usually the case, at Mr Scullion's expense.

Colleys advised that the market value of the flat was £353,000 and the rental value £2000 per month. Mr Scullion had some difficulty letting the flat following completion of the purchase in October 2002. He discovered that it could not be let for anything like the amount predicted by Colleys. It was only in April 2003 that Mr Scullion managed to let the flat and then for a rent of only £1,050 per month. Later on in 2006 he sold the flat for just £260,000 leaving a shortfall of some £60,000 on his mortgage.

Mr Scullion sued Colleys in respect of the inaccurate capital and rental valuations. He succeeded and the court held that a careful and competent valuer would have valued the property at between £270,000 and £330,000 and the monthly rental at between £1,100 and £1,350.

The principle that a valuer instructed by a lender owes a duty of care to a prospective residential purchaser was already established in Smith v Bush [1990] 1 AC 831. In the Scullion case Colleys argued that as Mr Scullion's purchase was a commercial investment no such duty was owed. This argument was rejected by the court. The judge did not consider it correct to characterise Mr Scullion as a commercial purchaser based on the facts before him.

As in Smith v Bush the property involved was a small residential flat; might the court take a different approach if a large scale development and professional property investors were involved? In any case the judge gave permission to appeal on this point.

The outcome of any appeal will be awaited with interest.