Mortgage Valuation Trap for Buy-to-Let

A recent decision of the Court of Appeal shows that a buy-to-let purchaser cannot safely rely on a valuation carried out on the mortgagee’s behalf.

In Scullion v Bank of Scotland PLC (trading as Colleys), Mr Scullion was a buy-to-let purchaser of a flat. The valuers negligently advised that the flat could be let for £2,000 per month. In fact, it proved impossible to obtain more than £1,050 per month.

Evidence showed that in the case of home purchases around 90% of prospective owner-occupiers did not commission a separate survey of the property, and relied instead on the mortgage valuation; the financial constraints of home purchase were recognised as a major factor in this. No such evidence had been produced in respect of buy-to-let purchases. In the Court’s view, those entering the property market purely as investors would be likely to have sufficient resources to commission a separate survey, and to be more financially sophisticated. They would probably also need specialist advice on the likely rental value and letting prospects of the property.

Some may consider the Court of Appeal’s decision rather harsh, and indeed the Court expressed some sympathy for Mr Scullion, whom it felt had been badly let down by his professional advisers. However, the Court’s ruling confirms that cases where owner-occupiers have successfully sued their mortgage lender’s surveyor are the exception rather than the rule. Buy-to-let purchasers who proceed without obtaining their own survey or valuation need to understand that they do so at their own risk. They are unlikely to have any remedy against a surveyor or valuer instructed solely by the mortgagee.

To find out more, contact Martin Banham-Hall or Caroline Wilton.

Filed: 04/08/2011 12:02:05