| case
studies – mortgages
12/01
which valuation type – and who pays for a valuer’s
negligence?
In preparation for their retirement, Mr and Mrs G decided
to move to the West Country. They applied for a small mortgage
to help them buy their ‘dream cottage’. On the
mortgage application they ticked the box for a ‘detailed’
property valuation. That type of valuation was important
to them because parts of the cottage dated back to 1800.
The firm arranged the valuation and Mr and Mrs G got the
report the following month. It was generally satisfactory
(it said the cottage only needed ‘general maintenance’)
– so the couple went ahead with their purchase. But
even on the day they moved in, they started to discover
things that were wrong with the cottage – things they
thought the valuer should have spotted. So they looked again
at the valuation. That was when they realised they had been
given a ‘simple’ valuation, not the ‘detailed’
one they asked for.
It cost Mr and Mrs G £60,000 to put everything right
with the cottage. To pay for the work, they cashed in a
life policy and also used some of their savings. Some of
the problems were with things Mr and Mrs G did not expect
the surveyor to have found. But as the firm accepted that
it had given the valuer incorrect instructions, Mr and Mrs
G asked it to pay £30,000 towards the repairs. It
would only offer them £5,000.
When we looked at the complaint, we thought there was a
chance that Mr and Mrs G should have realised sooner than
they did that they had been given the ‘wrong’
type of valuation. But it was just a small chance –
because there was only one small reference to the type of
valuation on the whole form. However, by then it was clear
that many of the problems – accounting for a significant
part of the repairs – should have been spotted even
with a simple valuation, not just a detailed one.
Another valuer, and an independent loss adjuster, both agreed
that the first valuer had been negligent. And we decided
that, given the overall circumstances, the firm should be
held responsible for that negligence. The courts say that
the starting point for working out compensation in this
type of case is to calculate the difference between the
price paid for the property, and the price that would have
been paid had all the defects been ‘out in the open’.
However, if Mr and Mrs G had known of all the problems to
begin with, it was very likely that they would have bought
another property instead. There were plenty on the market
at the time.
We
were told by independent valuers that the price differential
would only have been fairly small. But because we accepted
that the couple might well have bought another property
if they had known the cottage’s true condition, we
thought they should get more than that. So we told the firm
to pay them £25,000.
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12/02
duty to get a fair price when selling a property taken
into possession
In 1990, Mr B bought a house for £250,000 with a mortgage
from the firm of £150,000. But by 1994, he was having
money problems and he fell into arrears with his mortgage.
He put his house up for sale at £300,000 – but
no offers came in even after he reduced the price, in stages,
to £220,000.
In 1996, the firm obtained a court order authorising it
to take possession of the house. Mr B was made bankrupt
the same year. In January 1997, the firm took possession
of the house and put it up for sale at £160,000. In
March 1997, the firm accepted an offer of £155,000
from a Mr J.
12 months later, in March 1998, Mr B found out that Mr J
had sold the house for £250,000. Mr B complained to
the firm that it had sold the house too cheaply. The firm
did not agree. It said that Mr J’s initial offer for
the house had only been £130,000 but it had managed
to sell for £25,000 more than that. In any event,
Mr J’s offers were the only ones it received.
We were satisfied that the firm had done all the right things
when it put Mr B’s house on the market. It had consulted
a number of local estate agents and had followed a recommended
marketing strategy. There were good reasons why Mr J got
much more for the house the following year. Prices generally
had gone up, he had done a lot of work on the house and
he got a premium price from the neighbouring hotel –
which wanted the property as part of its expansion plans.
Mr B said the firm should have approached the hotel the
year before. But we decided the firm had done enough and
it had no reason to suppose the hotel would be interested
in the house. The hotel had shown no interest when Mr B
had been trying to sell it the year before, and if it had
really wanted the house then, it would hardly have waited
a year and then paid much more for it.
So we decided the firm had fulfilled its obligations towards
Mr B and there was no evidence that – in accepting
just £155,000 for the house – it had acted unfairly.
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12/03
repaid mortgage deed not properly dealt with
Back in 1991, Miss M bought an 80% interest in a house.
The other 20% was kept by a housing association. The firm
gave Miss M a mortgage to buy the 80% and the housing association
took a second mortgage to secure its 20% interest.
In 1996, Miss M borrowed more money from the firm in order
to buy out the housing association. The housing association’s
solicitors sent the second mortgage documents to the firm’s
branch, which sent them off to its centralised deeds department.
That department should then have sent them to the land registry
to get the second mortgage deleted from the register. But
all that happened was that the documents were put with the
main set of deeds.
Three years later, Miss M wanted to borrow some money from
another lender and offered it a second mortgage over her
house. Because she needed the money quickly and the housing
association’s mortgage was still on the register, she
decided to borrow the money unsecured, which cost her more
interest. Despite much to-ing and fro-ing between the housing
association’s solicitor and the firm, the problem had
still not been sorted out by the time Miss M wanted to re-mortgage
her house with her new employers (who were offering a cheap
deal).
We considered that Miss M had been caused a lot of distress
and inconvenience by the firm’s failure to deal with
the second mortgage documents when it received them from
the housing association’s solicitors. But we did not
agree that she had suffered any financial loss. A secured
loan would have been cheaper than the unsecured one, but
Miss M had made no attempt to change the loan over –
or to chase matters up. And her new mortgage with her employers
was not delayed by much. So we told the firm just to compensate
her for distress and inconvenience. As that had been considerable,
we said that the firm should pay her £1,000.
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