Negligent property surveyor's report: what costs can be recovered?

Purchasing a property is a significant financial investment and, to protect their interests, many will opt to obtain a surveyor’s report prior to purchase to ensure that there are no major defects that require repair.

So what happens when a surveyor’s report fails to identify fundamental structural issues with a property?

Phillips v Ward [1956] 1 WLR 471 established that the damages that could be claimed as a result of a negligent surveyor’s report would be the difference between the price paid for the property and the price the property would have been valued at had the defects been disclosed. This is known as the diminution in value of the property.

In this case, a couple purchased a property for £25,000 but discovered that they needed to spend an additional £7,000 to remedy defects that had not been disclosed by their surveyor’s report. However, as the property was retrospectively valued at £21,000, the actual loss to the couple was calculated as £4,000.

It is easy to see how this method of valuation can lead to homeowners being offered a far lower financial settlement than is required to put the property into the state of repair that they believed it was in at the date of purchase. However, a recent case in the Court of Appeal has suggested that this way of calculating damages is not an inflexible rule.

In Moore v National Westminster Bank [2018] EWHC 1805 (TCC) the bank failed to obtain a homebuyer’s survey report for their clients as requested. As a result, the couple purchased a property for £135,000 and subsequently discovered that £115,000 worth of repair works needed to be carried out. It was determined that, while the facts of this case were slightly different, it should be dealt with in the same way as a negligent surveyor case.

The Court of Appeal Judge held that, on the facts, the couple were entitled to recover damages assessed on the basis of the cost of repairing the defects in the property. It was stated that this approach made sense due to the facts of the case – the extensive defects, the fact that the repair costs were 85 per cent of the value of the property in a reasonable condition and the suggestion by the bank’s expert that the diminution in value was only £15,000.00.

The judge stated that diminution in value is not an invariable rule and that it can, in a proper case, be determined by the cost of repair.

Following the result of this case, it is important to note that the diminution in value measure remains the default method for calculating loss in a negligent surveyor case. However, as this judgment shows, there may be circumstances in which damages can be more accurately assessed by reference to the cost of repairs.

• For more information or to discuss a potential dispute of this nature, please contact Kate Fowler, solicitor in the Dispute Management Team on 0330 404 6434 or [email protected].