The number of cases brought against surveyors of property for negligence, allegedly caused during the property boom era, has increased markedly over the last few years but not all of them are successful, as the recent court action brought against Countrywide plc has demonstrated.
Many surveying firms take out PI insurance against subsequent claims of inaccurate valuations, but the premiums for insurance have risen in the last few years due to the amount of legal action that has been taken by lenders, particularly the big banks and building societies. Several smaller surveying firms have apparently gone bankrupt due to the amount of litigation that has been instigated.
Much of the litigation is due to the discrepancies caused by surveys made prior to the economic crisis of 2007 / 2008. Since that date, house prices have fallen nearly ten percent since that date nationwide. The largest losses have taken place in the North and the North West of England, with a drop of nearly fifteen percent while the average drop in London has been less than three percent.
Court action has been justified by the mortgage lenders because borrowers have been unable to make adequate repayments on loans which were taken out for properties which were overvalued at the time.
Solicitors acting for companies sued have commented that the big lenders have only themselves to blame for poor lending criteria and should not blame the surveyors who were only giving valuations which seemed accurate at the time.
Countrywide plc, which has a surveying arm together with its property management and real estate arms, reported in its annual report that it had suffered an exceptional number of professional indemnity cases. It has had to put up its fees substantially to compensate for payments made when litigation had been upheld.
In the GMAC case, Countrywide had been sued for a large price difference between the surveyed value of a property in York and its eventual selling price. The difference apparently amounted to an astonishing sixty thousand pounds.
The judge in this case found in favour of Countrywide and said that the lender had not made sufficient enquiries into the income potential of the mortgage borrower and if it had done so, the loan would never have been agreed to as there was evidence of an inability to make satisfactory payments.