It is well established that in certain, limited circumstances a professional advisor can owe a duty of care to third parties who do not instruct the advisor but nevertheless rely on his advice. In particular, following a couple of key cases in the past 30 years (Yianni v Edwin Evans & Sons and Smith v Bush), it has come to be accepted that a valuer acting for a lender can also owe a duty of care to a residential purchaser in respect of its valuation. Following the High Court’s decision in Scullion last year, it briefly appeared that this could also hold true for buy to let purchasers (see our previous update). However now that the Court of Appeal has overturned the High Court’s decision it seems that the widening of this duty of care has found its limits.
Broadly, the Court of Appeal gave two reasons for its decision. Firstly, no evidence was given for the assertion that the valuer knew or ought to have known that Scullion would rely on the valuation it provided for his lender. As a result it was not clear that it would have been foreseeable to the valuer that Scullion would rely on its valuation. Secondly and more significantly, the Court said that it would not be just or equitable to impose a duty of care on the valuer because of the fact the underlying transaction was a buy to let rather than a purchase for owner occupation. Unlike the High Court, the Court of Appeal did not appear to regard as significant either Scullion’s inexperience as a buy to let investor or the fact that the property concerned was residential and not particularly expensive. It said that there was no policy basis for extending valuer’s liability to purchasers of investment properties and cited a number of key differences between residential and buy to let purchasers as follows:
- buy to let investors are as a class likely to be richer and more commercially astute than people who buy to occupy and therefore could be regarded as more likely to obtain and more able to afford an independent survey or valuation;
- commercial purchasers of low to middle value residential properties such as those buying to let, can properly be regarded as less deserving of protection by the law against the risk of negligence than those buying to occupy as their residence; and
- a valuer valuing a property for a prospective mortgagee of a buy to let purchaser would expect a prudent purchaser to obtain his own advice on important matters not covered in the mortgagee’s valuation including more important detail on the rental value of the property.
The message to buy to let and other commercial property purchasers is clear: it is crucial to obtain your own independent valuation before purchasing a property. Though it is always possible that this case may be distinguished in the future, it is now highly unlikely that you will be able to rely on a valuation that has been produced for your lender.