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Rare professional negligence case is a useful reminder of surveyor's duties, says expert

The duty that a surveyor owes a developer who contracts it to report on a piece of land will vary depending on the nature of the report, a Scottish court has ruled.20 Nov 2012

Litigation expert Heidi Archibald of Pinsent Masons, the law firm behind Out-Law.com, said that Lord Glennie's ruling in the Court of Session was a "useful reminder" to both developers and surveyors of the extent of the latter's duties, particularly because very few professional negligence cases reach the courts. Most negligence disputes are settled by the parties in advance, meaning that courts rarely have the opportunity to clarify the law, she said.

"This decision is a useful reminder of the extent of a surveyor's duty of care in the context of preparation of a mortgage valuation report," she said. "The case emphasises that surveyors are likely to find themselves subject to different duties depending on the nature of the report which they are instructed to prepare, and the steps which the surveyor will be expected to take will also vary."

The developer, Karl Phimister, claimed that surveyors DM Hall had been negligent as they had not visited a piece of residential property he planned to purchase in Aberdeenshire when asked to draw up a mortgage valuation report. The report indicated that the piece of land was 1.12 acres in area when it was only 0.66 acres in reality, a mistake that was taken from sales information about the piece of land.

Phimister did not claim that the valuation itself was wrong or negligent. However, he argued that the firm had "owed [him] a duty" to check the area as part of drawing up the report. He said that if the firm had visited then it would have been obvious that the piece of land was smaller than the report claimed. Had he known the correct area he would not have purchased the property as the smaller size "severely restricted" his opportunities to develop the site.

DM Hall argued that they had been asked to provide a mortgage valuation for a "residential" property, which meant that as far as they were aware the value of the farmhouse and other buildings on the site was more important. The court received further evidence that the report was in fact a repeat of one carried out for another prospective purchaser, and was therefore not intended to be tailored to Phimister's development intentions. In addition, the terms and conditions of the report received by Phimister made it clear that the document was a valuation and "not a survey".

Lord Glennie agreed, stating that a surveyor need only check measurements where the acreage of the property was a "relevant factor" in assessing its value for mortgage purposes.

"[W]here, as here, the value lay in the buildings and not in the size of the plot, there was no reason to place such a burden on the surveyor," he said. "The matter is one of judgement for the surveyor ... I reject too the contention that the discrepancy in the size of the site ought to have been obvious to a surveyor carrying out that particular task assigned to him. He would not have been looking at the site through measuring eyes."

Archibald said that it was worth noting that if the acreage had been relevant in assessing the value of the property for mortgage purposes, then the decision would have been different.

"The court accepted that in relation to a mortgage valuation the main value lies in the buildings, and experts agreed that the purpose of a mortgage valuation report is to provide a valuation for mortgage purposes; not to check the acreage of the site," she said. "The court also accepted that a mortgage valuation report is not the appropriate tool to assess development potential."