PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.
A recent case shows the lack of wisdom of undertaking expert work unless you have the necessary expertise.
It is generally accepted that property valuation is an imprecise science. Accordingly, when the accuracy of a valuation is in dispute, the courts have adopted the idea of a ‘bracket’ or range of valuations that are reasonable. Only if the valuation is outside the range of reasonable valuations will the court consider that it is potentially negligent.
In a recent case, a property developer who had made a ‘disastrous’ property investment sought damages from the valuers. The claim exceeded the cost of the property, which was nearly £63 million.
The property was purchased for use as a factory outlet centre. The development was not successful because the rental income was insufficient. The valuation was based on a number of factors, which included the potential rental income. This turned out to be an overestimate. The rents charged contained ‘turnover rents’, as is common in such developments, and the turnovers of the businesses fell well short of the predictions of the valuers.
The question arose as to what was the appropriate bracket of valuations and the court ruled that this could be ascertained only by arriving at a bracket for each of the variables that were alleged to have been negligently valued.
Following this approach, the court held that the valuers were negligent to the extent that their valuation exceeded the bracket of reasonable valuations. They were found liable in the sum of £18.5 million. Key to the decision was the court’s finding that the valuers who had done the work did not have the necessary experience to value the type of development.
If you have made a business investment relying on the expertise of a professional and have come to regret your decision, contact us for advice.