Time Running Out For Lenders' Potential Negligence Claims Against Surveyors

When the property market collapsed in the 1990s, there was a corresponding rise in Lender Claims against Surveyors for losses suffered as a result of negligent valuations carried out during the "boom years". More recently, we have seen a similar boom in the property market during the first half of the last decade, before another property crash in 2007/2008. However, as yet the anticipated increase in Lender Claims against negligent Surveyors has not yet fully materialised; why is this the case?

The Clock is Ticking...

There may be a number of reasons for this, not least of which is that many Lenders are still in the process of assessing what losses (if any) they have suffered since the collapse of the property market and/or are assessing whether any losses suffered were caused by the crash itself rather than any negligent valuation.

However, time may be running out for many of these potential claims, as any professional negligence claim must be brought within 6 years of the date the damage was suffered. Whilst it might not always be clear precisely when the damage was suffered (see, for example our recent article Taking it to the limit – limitation periods in professional negligence claims), in most cases the damage will be deemed to have been suffered on the date the money was loaned by the Lender in reliance upon the negligent valuation. Accordingly, unless exceptional circumstances apply, claims arising from loans made during 2007 are likely to become time-barred during 2013.

Mortgage Lenders and Property Investors will therefore want to consider very carefully whether they have any potential claims arising from negligent valuations provided before the property crash, ahead of those potential claims expiring. Whilst each case will be different, below are some of the more common issues that may be relevant to such a potential claim.

Are there any issues relating to the Surveyor's Professional Indemnity Insurance?

As part of the process of engaging the Surveyor, the Lender may have become aware of some of the terms governing the Surveyor's terms of engagement and/or professional indemnity insurance cover. The Lender may, therefore, be aware of issues that could potentially arise in relation to, for example, purported caps on liability, the exclusion of consequential losses, and/or the late notification of potential claims.

Who actually instructed the Surveyor?

It may sound like a straightforward question, but in practice the party that...