This short but cautionary article about undertaking valuations has been submitted for publication by IIMS member, Elliott Berry MIIMS.
As most of you will be aware, it’s standard practice to issue valuations either as standalone documents or as part of a survey report.
We have long been under the impression that if we as a surveyor issue a letter of opinion that we are protected from claims as a result of discrepancies or unseen circumstances. However, it would appear that this belief is misplaced and this will have far reaching consequences among the surveying profession.
Allow me to explain the situation.
A survey was carried out on a narrowboat, during which some pitting was noted and subsequently reported on and that the base plate was very rough and it was nigh on impossible to ascertain its condition; but it was also stated that the surveyor could not see the whole surface of the boat unless it had been shot blasted (standard caveat) as there may, or may not have been further pitting behind the coatings. It was recommended that the vessel be shot blasted and the hull checked within 18 months. The purchaser was happy with the survey report and agreed to pay GBP £34k (an asking price of GBP £37k was believed to have been quoted) on the basis of the opinion given by the surveyor.
15 months passed by and the owner of the vessel, for which they had paid £34k, decided to follow the surveyor’s recommendation and have the boat shot blasted and painted. After extensive shot blasting, it was discovered that the vessel had more significant pitting than was first thought. The owner initiated a claim against the surveyor for negligent misstatement. The surveyor in question immediately notified his own insurance company and sent them a copy of the report. After detailed inspection it was decided that the surveyor had adequately covered himself in his report, having noted the pitting and included sufficient caveats to protect himself. Further to this, it was confirmed by the yard that there had been so many coats of paint on the hull that it would have been impossible for the surveyor to ascertain the extent of pitting beneath them.
The insurance company’s surveyor then inspected the vessel and decided that a value of £10k was now appropriate due to the current condition of the hull and that it would be in the surveyor’s interest to settle the claim as quickly as possible to prevent a build of costs.
When the surveyor argued this point, citing that the insurance company had agreed that there was no basis for a claim he was informed that it was in fact the valuation that had been the issue despite having been just the surveyor’s “opinion”.
As a result of this revelation the surveyor contacted a barrister to find out if this was correct and, indeed, why so. The barrister’s response was as follows, “A person or business can be sued in respect of the provision of any professional services as the surveyor would have owed a duty of care to the client. There is no immunity when providing valuations subject to the surveyor’s terms of business.”
Obviously, this response means that the surveyor’s insurance would indeed have to settle the difference in the values less the surveyor’s deductible. This is something when undertaking valuations that all surveyors should be made aware of.