Valuers’ duty of care in commercial valuations
The Court of Appeal handed down an authoritative and coherent decision in Scullion v Bank of Scotland plc [2011] EWCA Civ 693 which is of relevance to investors considering buying commercial property portfolios. Scullion concerned a buy-to-let purchaser who applied for a mortgage authorising the lender to obtain a valuation at his expense. The application form stated that the valuation was to be on the lender’s behalf and that the valuer was not giving any assurance as to the value of the property. The valuer got the assessment of the likely rental income wrong, the borrower suffered loss and sued the valuer.
The Court of Appeal decided that it was not foreseeable that the valuer owed a duty of care to the borrower and that it was not fair, reasonable or just to impose liability. Following Scullion, absent any extension of the scope of his duty, a lender’s valuer for a commercial transaction will owe a duty to his immediate client only. So if the loan were securitized, for example, he would not owe a duty to remote investors who may suffer a loss. Also, valuers’ disclaimers to third parties will be effective in commercial transactions and are advisable to preclude an argument that the valuer did extend the scope of his duty.
