Professional Negligence Claims Revisited

It is well known that valuers favour a price per square metre valuation method, particularly when it comes to flats, but when there is conflicting evidence between this method and the use of comparable sales figures, which does the Court prefer?

In the recent case of Paratus AMC Limited and RMAC 2005 NS1 PLC v Countrywide Surveyors Limited (2011) the claimants (a lender and a related specific purchase vehicle), alleged that the defendant had negligently overvalued the property. In determining whether the valuation was negligent or not, the Court heard evidence from each of the parties’ experts.

The claimant’s expert relied on a price per square metre calculation, applying a bracket of only 4% as the property was a flat and therefore there were many comparables. Whilst the defendant had also relied on a similar formula, the expert concluded that the defendant had used superior properties as comparables, which resulted in a higher and therefore negligent valuation.

The defendant’s expert instead used comparable sales evidence obtained from the Land Registry for the period immediately prior to the valuation. He also commented that the flats were relatively new, and so values were likely to be affected by developer’s incentives and the volatile market. There were therefore relatively few comparables and so a bracket of 11.4% was appropriate. In his opinion, the valuation was not negligent.

The Court preferred the defendant’s expert’s method of valuation but assigned a bracket of 8%. On that basis, the defendant’s valuation was not negligent and the claim was dismissed.

Finally, the court also commented on the use of securitisation and found that although the beneficial interest in the loan had been assigned, the cause of action had not. Securitisation in negligence claims is a complex and developing area and we will keep you closely advised.

Emma Giles, Solicitor, Manchester

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