Surveyors' Duties: When Exercising Reasonable Skill And Care Is Not Enough

A recent Court of Appeal decision has established that

the duties imposed by a surveyor's retainer are not limited

to carrying out his inspection and valuation with reasonable

skill and care. The surveyor's retainer may contain some

obligations which are "unqualified". Failure to

comply with such obligations is a breach of contract even if in

doing so the surveyor exercised reasonable skill and

care.

A tale of two houses

In this case, a surveyor had provided a valuation of a

partly-built residential property (House A) to a bank for

mortgage purposes. The surveyor was instructed to contact the

borrower to arrange an inspection, and the borrower indicated

to the surveyor which property (amongst a number that were

under construction) was the subject of the valuation.

Unknown to the surveyor, the borrower had deliberately led

him to value the wrong property (House B). On the strength of

the valuation, the borrower was advanced a loan by the bank,

which took a mortgage over House A. The mistake was discovered

when the borrower defaulted and the bank repossessed House A.

House A was worth less than House B: the valuation figure

provided by the surveyor had therefore been wrong.

If in doubt, sue the surveyor

Even though it was said that the surveyor had exercised

reasonable skill and care in carrying out his valuation,

including in locating (incorrectly, as it turned out) the

property to be inspected, he was found liable to the bank for

its losses.

Two reasons were given for this decision. First, in a

surveyor's retainer there is an inherent obligation to

inspect and value the right property. Secondly, part of the

valuation certificate signed by the surveyor stated: "I

certify that the property offered as security has been

inspected by me." House A had been offered as security;

House B had been inspected: this was a breach of contract.

Comment

Surveyors (and their PI insurers) will be concerned that the

exercise of reasonable skill and care will not be enough in

some circumstance to defeat overvaluation claims. In this

context, the balance of risk and return (the surveyor's fee

was £250; the claim more than £30,000) is weighted

even more heavily in favour of the instructing banks than is

already the case in the conveyancing market. As Sir Anthony

Clarke (who dissented from the majority decision in this case)

put it, for a surveyor to have charged such a low fee and

agreed to be liable to a bank even if they exercised all

reasonable skill and care...