The importance of valuation instructions

Published on

Brian Pitt, CEO of Rockstead

Phimister v DM Hall LLP [2012] CSOH 169

The issue was the scope of the surveyor’s duty to a purchaser. Phimister sought damages from DM Hall for professional negligence in respect of a mortgage valuation report, on the grounds that the firm owed him a duty of care to check the area of the property as part of their valuation.

The Pursuer [a Scottish litigation] had sought a valuation for mortgage purposes, even though it was his intention to develop the site in the future. The valuer was challenged on the basis that he should have checked the land area as presented by the estate agents in its particulars of sale.

The claim failed and it was the judgement of Lord Glennie that the purpose of a mortgage valuation report was not to check the acreage of a site, but to provide a valuation for mortgage purposes. As such the main value would lie in the buildings, unless the acreage of the site was a relevant factor in assessing the value for mortgage purposes.

The judgement also accepted that a mortgage valuation report was not the appropriate tool to assess development potential; if the purchaser wanted such an assessment, he should have instructed a development appraisal to be carried out.

This case highlights the importance of clear instructions to valuation companies when seeking their opinion of value. We often comment that the valuation process, including the instructions to a valuer and the way the report is interpreted upon receipt, need serious consideration by lending underwriters. Latterly we believe there was a focus on the valuation figure only.

This judgement may be significant in professional indemnity claims situations, and in particular when dealing with development finance. It is important that all parties ensure that instructions are absolutely clear at the outset, and the report is considered in detail before any lending decision is made.

Brian Pitt is CEO at financial services risk advice and due diligence company Rockstead. He can be contacted atBrian.pitt@rockstead.co.uk

Latest POLL

COMMENT ON MORTGAGE SOUP

We want to hear from you!
Leave a comment and get the conversation started.
You need to register to post, so please login or sign up below.

Latest articles

Berkeley Alexander appoints new BDM

General insurance provider Berkeley Alexander has announced the appointment of Grant Robinson as a...

Newcastle for Intermediaries adds three-year fix range to mortgage offering

Newcastle for Intermediaries has introduced a new range of three-year fixed rate products. It said...

Mortgage product availability surpasses 25,000 for the first time

The number of mortgage products available in the UK has reached an all-time high,...

ASG Finance launches loan for HNW investors

ASG Finance has introduced its latest funding initiative: the ‘Base Rate Beater’ secured investment...

Other news

Why it matters that bridging hit more than £10bn last year

We see many numbers bandied around in the financial industry, which can sometimes have...

Berkeley Alexander appoints new BDM

General insurance provider Berkeley Alexander has announced the appointment of Grant Robinson as a...

Newcastle for Intermediaries adds three-year fix range to mortgage offering

Newcastle for Intermediaries has introduced a new range of three-year fixed rate products. It said...