"those Who Joined The Buy-To-Let Rush In The Early 2000S, Only To See Their Property Prices Plummet, "

[Si1]

http://www.lettingagenttoday.co.uk/news_features/Valuer-had-no-duty-of-care-to-buy-to-let-borrower

in particular

"The result puts an end to speculation that those who joined the buy-to-let rush in the early 2000s, only to see their property prices plummet, would seize the opportunity to make a claim against valuers.

Marie-Louise Gobbi, the solicitor at Walker Morris who represented Colleys, said: “The Court of Appeal’s judgment clarifies the extent of the duty owed by valuers in buy-to-let situations. The decision is good news for surveyors, and provides a clear basis for resolving similar claims brought in the buy-to-let sector.

“Buy-to-let investors are not in the same position as ordinary domestic purchasers, and cannot assume they will automatically have the same rights and remedies. The case also provides crucial guidance on the calculation of damages in rental over-valuation cases.”"

I feel that some protection/forbearance is owed owner-occupiers who bought at a high price, as they were essentially buying a roof over their heads, egged on by societal pressure (govt, famiuly, work)

BTL however, appears to be getting hung out to dry by the Powers that Be.

No money tree then.

[Surf's Up]

OTOH delighted to see BTL greedsters getting their comeuppance, but I can't see the logic in saying there was a different level of duty of care, in this case none. Particularly coupled with lenders' readiness to dish out "liar loans". What am I missing here?

[Si1]

OTOH delighted to see BTL greedsters getting their comeuppance, but I can't see the logic in saying there was a different level of duty of care, in this case none. Particularly coupled with lenders' readiness to dish out "liar loans". What am I missing here?

see:

The court’s reasoning was that in ordinary domestic purchases it is highly likely that the purchaser will rely on the valuation, and if it is incorrect they may suffer losses. Therefore it is right that the duty of care extents to the ultimate purchaser – ie the modest residential owner occupier.

However, due to the investment nature of the purchase in this case, it was not sufficiently clear that it would have been foreseeable by Colleys that Mr Scullion would rely on its report rather than obtaining his own advice; for similar reasons there was no sufficiently clear proximity of relationship; and in any event, it was not just and equitable that Colleys should be liable to Mr Scullion because the transaction was commercial in essence.

The result was that Colleys owed no duty of care to Mr Scullion, and so had no liability to him in negligence and therefore no damages were owed.

The Court of Appeal also recognised that it was not correct to attribute all loss of revenue which Mr Scullion suffered in connection with the property to the inaccurate rental valuation. Clearly there were periods when it would have been unlet and/or unsold for reasons unrelated to the over-valuation.

The appeal decision therefore goes on to give crucial guidance as to how damages in rental over-valuation cases should be calculated and capped.

The decision is good news for surveyors. The Court of Appeal has made a strong statement that it was wrong in principle to extend the duty of the lender’s valuation surveyor to purchasers in commercial cases. Domestic owner-occupier cases are seen as a justified by consumer protection principles, with buy-to-let investors less deserving of protection and more likely to obtain and to be able to afford their own valuation.

[bobthe~]

see:

Fair enough, unless of course there was collusion between the surveyor and the builder/vendor.

[tomandlu]

see:

Interesting, and reasonably sensible IMHO, but I would have thought that a better case could be made for establishing whether the valuation was given in good faith or not and deciding on that basis. Was the valuation reasonable at the time of the valuation? If not, then the valuation was either incompetent or fraudulent.

[Si1]

Interesting, and reasonably sensible IMHO, but I would have thought that a better case could be made for establishing whether the valuation was given in good faith or not and deciding on that basis. Was the valuation reasonable at the time of the valuation? If not, then the valuation was either incompetent or fraudulent.

surely that depenmds on the valuation criteria of the mortgage lender, and even then it is up to the lender to sue; apparently the valuer bears no responsibility to the mortgagee in this case

Edited June 23, 2011 by Si1

[Surf's Up]

I read the explanation, but it seems to me to lack logic. On a domestic purchase the duty of care is there because it's the roof over the borrower's head, but a bad choice in BTL could equally wind up costing the borrower the roof over his own head. This could be made more likely by wildly inflated valuation of the BTL, but nothing can stick to the lender. Seems perverse.

[FIGGY]

I think its more about someone whoe buys for themselves has no commercial understanding where as an investment buyer should be drawing on more than one source of infomation .

Edited June 23, 2011 by FIGGY

[tomandlu]

I think its more about someone whoe buys for themselves has no commercial understanding where as an investment buyer should be drawing on more than one source of infomation .

That seems to be the logic - I'm just not quite clear how this makes a difference where fraud has been practised. I'm on the fence when it comes to incompetence. On the one hand, as you say (and reflecting the ruling), the 'investment' buyer should take more care, but on the other, why should home-buyers, presumably making one of the biggest purchases of their lives, treat it as though it was a cardigan from M&S?

I dunno - if you buy into a bubble, then you might well get burned, but I think the valuation should stand up to a certain level of scrutiny in terms of was it reasonable at the time it was made.

[koala_bear]

I read the explanation, but it seems to me to lack logic. On a domestic purchase the duty of care is there because it's the roof over the borrower's head, but a bad choice in BTL could equally wind up costing the borrower the roof over his own head. This could be made more likely by wildly inflated valuation of the BTL, but nothing can stick to the lender. Seems perverse.

The issue with this for me is that he used the bank's surveyor who has the bank's interest at heart rather than the borrowers, if he had retained his own surveyor and they had done the same the outcome might be different. The court has essentially viewed him as negligent for being inept in not using is own surveyor with his interests at heart but being silly/cheap in using the other parties'.

Banks at the time were quite happy with high valuations (both types) as it enabled them to lend more to customers and hence get more income from them - the opposite to many bank now.

There will still be plenty of cases to come, this has only closed the door on mis-valuation by the other party's surveyors only, if your own surveyor has f*%ked up still fair game. Most of the BTL promotion companies weren't licensed for investment advice...

[Rare Bear]

I would of thought that the buyer, whether home buyer or buy to let, could not have any claim on the surveyor except in cases of outright fraud. The surveyor, while he is paid for by the buyer, does the valuation purely to protect the lender and the valuation is a valuation at the time of purchase not some time down the road.

Still, I suppose some ambulance chasers will make a few quid.

[eric pebble]

....... Particularly coupled with lenders' readiness to dish out "liar loans". What am I missing here?

WOT?

LIAR LOANS?

THE Elephant in the Room and THE fuel that powered the whole corrupt Ponzi/Pyramid Scam....

[spyguy]

This could be a significant case.

The courts are drawing a line on people trying to get compensation from suing the fine,. upstanding people involved with property.

Basically - if you're a BTL muppet then you cannot cry and say the bank/surveyor made me do it.

I would guess 80%+ of BTL bought since 2002 have a number of issues.

I cannot comment of London but A few towns I follow are getting horrendous voids - 3 months/year.

AFAIK, the shoe shiners went big on BTL from 2004-2007.

It always used to make me cringe when EA's used the term 'ideal investment opportunity' Talk about opening yourself up to a load of legal grief a few years down the line.

[spyguy]

. Most of the BTL promotion companies weren't licensed for investment advice...

They don't need to be. I can sell you a whole BTL, house, ostrich, name it. If an asset is sold to a single individual then I can make pretty much any claim I like - Buy this pencil. Fantastic investment - 30% return/year. Basically, buyer beware.

However if I sell something to a group of people then it comes under security law.

Aside from liar loans, which are well known + documented on this board there is another property area which I'm keeping my eye - individual rooms in hotels and the like. There is a loads involved with this - selling a hotel room form someones SIPP. The fallout from this will be massive.

As the room is owner outright, the seller can loads of nuts claims - 30% return etc.

Have a google for Skelwith group and its hotels.

[Goat]

I would of thought that the buyer, whether home buyer or buy to let, could not have any claim on the surveyor except in cases of outright fraud. The surveyor, while he is paid for by the buyer, does the valuation purely to protect the lender and the valuation is a valuation at the time of purchase not some time down the road.

I think the argument is that a person (not just a surveyor) has a duty of care to another party where they can reasonably forsee that they will place reliance upon their work.

What they should be doing is including a disclaimer along the lines of "this report is made solely to Bank of Money PLC .............. to the maximum extent permitted by law we do not accept or assume responsibity to any other party......."

[Redcellar]

The issue with this for me is that he used the bank's surveyor who has the bank's interest at heart rather than the borrowers, if he had retained his own surveyor and they had done the same the outcome might be different. The court has essentially viewed him as negligent for being inept in not using is own surveyor with his interests at heart but being silly/cheap in using the other parties'.

Banks at the time were quite happy with high valuations (both types) as it enabled them to lend more to customers and hence get more income from them - the opposite to many bank now.

There will still be plenty of cases to come, this has only closed the door on mis-valuation by the other party's surveyors only, if your own surveyor has f*%ked up still fair game. Most of the BTL promotion companies weren't licensed for investment advice...

That's it in a nutshell. From what I can read, the idiot tight ar*e didn't purchase his own. The surveyor was working for and under contract with the bank not the man. I expect his contract even said the work was not to be relied upon by third parties. Standard stuff when giving assurance.

What a d1ck and saving a few grand didn't pay back now did it. If he'd got his own he coud have a case with his own company. So much money on the table at risk and people try to cut corners. Incredible.

[Si1]

Quite.

tbh - I think the distinction they draw here between an "ordinary homeowner" and a "buy-to-let professional" moot.

I would guess that an individual buying a buy-to-let is no different to a private individual buying a fund for their pension.

i.e. most btl people are 'amateurs' and should actually be afforded some protection from the sharks along the lines of 'wealth warnings' and the like.

Not "property only ever goes up and you can't lose" marketing messages for which there is now no recourse.

no - if you are a private investor buying funds for your pension, you typically take financial advice of some sort, unless you opt out in which you declare this and take personal responsibility

same with BTL - if you pay someone to advise you then you have someone to sue, if not then you don't, tough

[koala_bear]

It appears that there was a bit of Liar Loan action going on too (see news board)

From the solicitors in the case's press release

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.

Edited June 24, 2011 by koala_bear

[Surf's Up]

"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;"

Is this an up to date perception? The law doesn't seem to recognize the notion of "buy-to-let rank amateur".

[Bruce Banner]

"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;"

Is this an up to date perception? The law doesn't seem to recognize the notion of "buy-to-let rank amateur".

A few years ago the wife and I were served by a pub waiter in his 20s who was banging on about buying his third or fourth buy to let. All on borrowed money, I bet he's not so chatty now .

[Si1]

"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;"

Is this an up to date perception? The law doesn't seem to recognize the notion of "buy-to-let rank amateur".

I think it is using flattery as a weapon!