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  • Writer's pictureChris Thorne

Be careful what you assume

Many UK valuers will have heard about the recent case of Hart v Large, where a valuer was found negligent for not noticing or reporting defects in a house which their client subsequently purchased. Because it involved a residential property it may not have registered as relevant to valuers of other types of asset, in particular commercial real estate. On the contrary, I believe this case has lessons for valuers operating in any common law jurisdiction.


The background concerns a “HomeBuyers Survey and Valuation” prepared by a chartered surveyor for the prospective buyers of a detached house in an exposed coastal location which had recently undergone significant alteration and refurbishment.

A “HomeBuyers Survey and Valuation” is a service designed by RICS aimed at providing prospective house buyers in the UK with a market valuation and information on the building’s condition at an economic price. It has to be provided using standardised terms of engagement setting out the limits on the investigations and must be delivered on a proforma report provided by RICS. The information about the service which RICS requires its members to provide to prospective clients includes advice that the limited inspection and investigation means the service may not be suitable for older or more complex dwellings, or where unconventional materials or construction techniques have been used. The member is also obliged to advise the client if they consider the standard limitations mean that this service is not suitable for their requirements.

In January 2021 the Court of Appeal upheld the approach taken by the High Court to the assessment of damages, which was that these should be calculated not only on the diminution in value directly attributable to defects that the valuer had failed to notice but also consequential losses suffered by their client. This has produced considerable legal comment. The fact that the damages awarded reflected the cost of rectifying defects which could not have been observed by the surveyor working under the HomeBuyer service limitations are causing concern for valuers and surveyors, not least because of the insurance implications.

However, the Court of Appeal made it clear that it considered the facts of this case to be unusual and was confident that its decision does not depart from the well-known principles governing the measure of loss in negligent surveyor cases. Nevertheless, the case does contain some important lessons for valuers on how they can improve the advice they provide and minimise the risk of being on the wrong side of a future claim. These are mainly to be found in the decision of the High Court that found the surveyor negligent in the first place after a six-day hearing. I highlight two aspects of this decision relating to the use of assumptions and standard terms of engagement and how they can provide the valuer with a false sense that they are secure against adverse claims.

Assumptions must be reasonable:

The standard RICS HomeBuyer report includes the following assumption:

“…an inspection of those parts that I could not inspect would not identify significant defects or a cause to alter the valuation.”

The RICS Red Book explains that an assumption can be made where it is reasonable for the valuer to accept something is true without the need for specific investigation or verification. Further, any assumption must be reasonable and relevant having regard to the purpose for which the valuation is required.

The Judge found that the most significant problem discovered following the purchase was damp penetration due to inadequate or incorrectly installed damp proofing. He accepted the surveyor’s evidence that neither his visual inspection nor the non-invasive tests made using a damp meter revealed a damp problem. However, the surveyor reported that:

“…the timber framed wall areas are likely to be designed with suitable weatherproofing membrane, insulation and vapour control within the structure, but these are concealed; however, there are no apparent reasons to suspect any defects or deficiencies."

And also:

“The lower ground floor room would also have damp-proofing provision of the internal main walls which are built against the higher ground beneath the house. None of the damp-proofing detail can be seen.”

The exposed coastal situation would make the consequences of inadequate damp proofing of greater significance than might be the case elsewhere, so the lack of evidence of adequate damp proofing should at least have put the surveyor on enquiry as to whether the standard assumption was reasonable. Instead of exercising a due degree of scepticism and indicating that further investigation would be prudent, advice was given which made a further assumption, which proved to be rash, that because suitable weatherproofing and vapour control measures should have been in place they actually were.

The lesson is that while it might be reasonable to assume that there is no problem where your terms of engagement indicate that you either will not investigate or only make limited investigations, you still need to consider the risk of there being a problem and advise the client of this. This applies just as much to an assumption originating from RICS as it does to any other "standard" assumption. Additionally, where you can see no evidence of measures taken to eliminate a potential risk you should not make an assumption that these are in place.

If during your agreed scope of investigations you see or discover something that indicates an assumption may not be reasonable, neither should you blindly forge ahead and make that assumption, without reverting to the client alerting them to the issue. They then have the choice of commissioning a more detailed investigation before the valuation is confirmed or accepting that your valuation is conditional upon further investigations finding that there is no problem.

This does not mean that blanket recommendations for further investigation must be made for every assumption made. On the contrary, the 2019 RICS Home Survey Professional Standard expressly provides that the surveyor must only recommend justifiable further investigation, i.e. where the limits on investigation have precluded identification of a problem that there are reasonable grounds to expect might exist. While this RICS requirement is obviously specific to home surveys, it is not a bad policy for valuers of all types of real estate to follow. Crying “Wolf!” in relation to everything that cannot be confirmed within the scope of a valuer’s instruction will not be regarded as helpful by clients and can undermine confidence in other advice that is provided.

Beware of Standard Terms

Another lesson is that the applicability of standard terms to different instructions must be considered. The evidence before the High Court included a template email that the surveyor used to confirm instructions, which contained links to the documents about the HomeBuyer service required by RICS. This template also included the following paragraph:

“If you should have any reason to wish to reconsider the service you require, please advise me immediately. However, I am confident that the HomeBuyer Report is satisfactory for this property and will provide you with the necessary information & advice.”

Although this may or may not be standard wording used by the surveyor it was unequivocal that a HomeBuyer report was suitable for this property. The RICS Professional Statement makes it the surveyor’s duty to check before the contract for the service is signed that the client is making the appropriate choice of survey. However, an obvious difficulty is that without seeing the property the surveyor cannot always be confident this initial advice is correct. Certainly, the possibility it may be incorrect needs to be at the front of the surveyor’s mind when they visit the property. In this case it was confirmed by the Judge that a surveyor has a continuing obligation to keep such advice under review between being asked to carry out a survey and reporting following that survey.

Of course, this obligation may only legally arise where the surveyor has given specific advice on the level of service and investigation suitable for the client’s needs, especially where the client is a consumer rather than a business. However, for all valuations or related services it is important that the applicability of standard terms is considered on a case by case basis. Where it can be reasonably anticipated that specific issues may arise which differ from the norm, considering an amendment to those terms to ensure that advice suitable for the client’s needs is provided is time well spent.

In conclusion many documents used in providing a valuation service are based on templates with boiler plate text describing the usual limitations and assumptions. Where any instruction involves something that is outside of the norm and with potential for material risk for the client, consideration should be given to making appropriate amendments to those in the standard documents. This not only helps avoid misunderstandings with your client, it can also keep you out of court!

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