With the recession showing no signs of abating, and property prices remaining static, recent trends in the Northern Ireland Courts are now beginning to clearly show an influx of claims by financial institutions who are seeking to recoup lost value arising out of disastrous property transactions. As many borrowers have no means to repay their loans, lenders have considered other possible avenues to recover loss. This has resulted in a significant increase in professional negligence and breach of contract claims against valuers and, in particular, solicitors. Similar trends are being experienced by the Courts in the Republic of Ireland, England, Wales and Scotland.

Claims against Solicitors

Claims against solicitors can either be brought in contract or tort, as a solicitor will often owe the client a concurrent duty of care. The relationship between solicitor and client is commonly a contractual one and the extent of the solicitors' duties will usually depend on the express and implied terms agreed between the parties at the beginning of the instruction. In many property transactions, however, solicitors will have simultaneously acted for the lender and borrower alike. It is common in this type of scenario for problems to arise as the solicitor may have competing interests to protect.

This problem can be exacerbated where the solicitor is not only acting for the lender, but also acting for the Vendor and Purchaser in the same transaction. Some illustrations of ongoing breach of contract and/or negligence claims in which we are involved, include:

  • A solicitor incorrectly certifying to the Bank in its Report on Title that the land the Vendor was selling was marketable and owned by the Vendor.
  • A solicitor incorrectly asserting that the borrower had clear and marketable title to the property when there were covenants on the title restricting the number of developments that could take place on the site in question.
  • A solicitor releasing purchase proceeds to the Vendor Solicitor when acting for the Bank and for the borrower/developer without obtaining a proper letter of undertaking to protect the Bank's interests.


As with solicitor claims, claims can also be brought against valuers in contract and for professional negligence. One aspect of the liability in this area in particular, which is misunderstood by valuers, is the concept of liability arising to third parties such as banks or other financial institutions. This is a well established concept in the Northern Irish Courts, provided it is clear that the bank will be relying on what is being said by the valuer in question. This in legal parlance is often called the special relationship under the celebrated case of Hedley Byrne v Heller, which was recently relied upon by our Chancery Judge, Mr Justice Deeny in a negligence claim against a financial adviser.

However, if there is a contractual relationship between the valuer and the bank then the bank will have a concurrent claim for breach of contract as well. In the recent case of K/S Lincoln and Others v CB Richard Ellis Hotels Limited [2010] EW HC 1156 (TCC), Mr Justice Coulson held that whilst a valuer might be in breach of duty because he fell below the standard of a reasonable valuer in his methodology, that valuer will not be liable in negligence if it can be shown that, notwithstanding the error, the valuation figure that he produced was within a reasonable bracket.

The permissible margin of error

After reviewing the case law on the appropriate margin of error, Mr Justice Coulson found that as a matter of general principle, the position to be taken from the existing authorities was as follows:

  1. For a standard residential property the margin of error may be as low as plus or minus 5%
  2. For a valuation of a one off property, the margin of error will usually be plus or minus 10%
  3. If there are exceptional features of the property in question, the margin of error could be plus or minus 15%, or even higher in an appropriate case.  

On the facts of this case, Mr Justice Coulson found that the margin of error should be at least 10% either side of the correct valuation figure. The valuation was within this range and therefore CB Richard Ellis had not acted negligently. This was despite the fact that they employed an overcomplicated methodology and failed to take account of the shortfall clawback provision when they undertook their valuation.

As demonstrated by this case, if a valuation figure falls outside the margin of error, the standard of care exercised by the valuer will need to be analysed and an assessment be made as to whether or not the valuer acted negligently.

Beware Limitation periods!

For both breach of contract and tort claims, the general period allowed by the law within which a party can bring such a claim is six years from the date the cause of action accrued. This is quite often the date of the transaction itself. In appropriate circumstances, it is possible to extend time to bring such a claim in tort for a further period of three years if the party in question was unaware before the primary limitation period expired that it had a particular claim. However, there is no such extension in respect of claims for breach of contract. That said, the general principle enunciated by the Courts in all types of litigation claims is that such claims should be brought promptly in order to preserve documentation and also to take into account the fact that, with the passage of time, memories fade and witnesses become unavailable. There may also be issues with regard to claiming against the solicitors or valuers insurance if there is delay or if a claim is not brought promptly.