Buy-to-let test case is withdrawn from Supreme Court

Buy-to-let test case is withdrawn from Supreme Court

An important test case with implications for valuers, lenders and buy-to-let purchasers has been unexpectedly withdrawn from the Supreme Court.

The court had been due to hear Scullion v Bank of Scotland, a long-running case in which the purchaser, Mr Scullion, was originally awarded £72,000 for losses incurred as the result of a valuation which over-stated both the rent of a property and its value.

The valuer had been employed by Colleys – now part of Bank of Scotland – and was instructed by Mortgages plc to provide a valuation report of the capital value and anticipated rental value of a property Mr Scullion was interested in buying in Cobham, Surrey.

Mr Scullion applied for a £283,000 mortgage against a purchase price of £353,000. The valuation agreed with the purchase price and put the achievable rental income at £2,000 a month.

With mortgage repayments coming to £1,440 per month, Mr Scullion proceeded with the purchase in 2002, but found he could not achieve more than £1,100 monthly rent, and when he sold, the property achieved just £250,000.

Mr Scullion brought a claim of damages against Colleys, and won the first round of his legal battle in 2010, on the basis that previous case law had established that the duty of care owed by a surveyor to the lender that instructed him is also extended to the borrower purchasing the property.

The judge described Mr Scullion as an amateur investor who had relied on the valuation.

However, that decision was overturned by a judge in the Court of Appeal in 2011, which ruled that the duty of care did not automatically apply to buy-to-let purchasers, rather than someone borrowing for owner occupation.

The Appeal Court said that buy-to-let investors were more likely to be commercially astute.  

Mr Scullion sought to get this overturned in the Supreme Court, but withdrew his action. It is unclear whether there has been an out of court settlement, or whether he dropped his case on legal advice.

Alexandra Anderson, litigation partner specialising in valuation negligence at Reynolds Porter Chamberlain, said the outcome was good news for valuers.

She added: “It means that the potential wave of buy-to-let investors bringing claims against surveyors is now unlikely to materialise as the law on duty of care is against them.”

 
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