Surveyors' PI - scope of duty of care
A recent case provides a reminder about the limited scope of a surveyor’s duty of care in tort to a prospective purchaser in certain circumstances.
Mr Squirrell, a property developer, sought to establish that Bradleys, a firm of surveyors, owed him a duty of care. The circumstances were slightly unusual. Squirrell had already exchanged contracts on a number of properties, but finance had not been put in place. An offer of finance was obtained subject to a valuation. Bradleys provided a valuation to a lender, but this was subsequently withdrawn by Bradleys (because, on Bradleys account, Squirrell had inflated the total purchase price), which led to Squirrell being left without finance for his various purchases.
Squirrell contended that Bradleys owed him a positive duty to provide a valuation following the withdrawal of the first valuation. In effect Squirrell was seeking to insist upon Bradleys performing its contract with the lender.
The judge decided that no such duty of care existed because the relationship between Bradleys and Squirrell was not one with sufficient proximity to found a duty of care. Furthermore, it would not be fair and reasonable for Bradleys to be liable to Squirrell for the losses that flowed from his failure to secure funds for his purchases.
The judge also made some useful comments about the scope of the duty of care Bradleys would have owed to Mr Squirrell if this had been the more usual situation in which the purchaser was relying on the valuation in order to decide whether to proceed with a purchase.
The current law on the scope of a surveyor’s duty of care in tort to a prospective purchaser draws a distinction between:
1. A purchaser of a residential unit for the purposes of an investment - where a surveyor is unlikely to owe a duty of care to the purchaser.
2. An ordinary domestic householder purchasing his home - where a surveyor is more likely to owe a purchaser a duty of care.
The rationale for drawing this distinction appears to be that commercial purchasers of residential property, such as those buying to let, are more likely to obtain and rely on their own independent valuations and surveys, than those buying to occupy as their own residence.
The case of Mr Squirrell should provide further comfort to surveyors, and their insurers, that the brief extension to the scope of a surveyor’s duty of care that we saw last year appears to have been halted for now.
This article first appeared in Law-Now, CMS Cameron McKenna's free online information service, and has been reproduced with their permission. For more information about Law-Now, click here.