A recent case in the Court of Appeal has ruled that buy-to-let purchasers are not owed the same duty of care by the mortgage lenders’ surveyor as someone purchasing a property for their own use.
This landmark decision was the finding in the case of Scullion v Bank of Scotland plc (trading as Colleys), and has major implications for buy-to-let investors, lenders, valuers and insurers.
Mr Scullion purchased a buy-to-let residential flat in 2002 which had been valued by his lenders’ surveyors as worth £353,000 with an anticipated rental income of £2,000 a month. Mr Scullion only managed to obtain a rental of £1,050 a month, which did not cover the cost of his mortgage. After selling the property in 2006 Mr Scullion sued the surveyors alleging negligent overvaluation of both the capital and rental values, and saying that he had relied on these valuations when deciding to purchase the property.
The Court originally found that the surveyors did owe Mr Scullion a duty of care, and that the capital and rental valuation was negligent. Damages were awarded of £72,234, based on the negligently high rental value. Damages were not awarded for the capital valuation as no loss had been incurred. Subsequently Colleys appealed this decision and no damages were paid as the Appeal Court overruled the original decision on the basis that the transaction was commercial in nature.
Commercial Property Partner, Oonagh McKinney says “Judgement was handed down in June this year and concluded that Mr Scullion had bought the property for commercial investment purposes. It was not the same as ‘an ordinary, domestic householder purchasing his home’. It was held that buy-to-let investors were likely to be more commercially astute and able to obtain independent advice and therefore ‘less deserving of protection by the common law against risk of negligence than those buying to occupy their own residence’.”