Purchasing land is a complicated affair. It is therefore no surprise that professional advice is part and parcel of such transactions; lay people are not qualified to make judgments about (for example) the structural integrity of or the legal rights affecting the property that they wish to purchase. It is simply not reasonable to expect lay people to make specialist or technical judgments concerning the qualities of a particular property.
As such, professional advice is crucial to ensure that a purchaser is given the opportunities and guidance necessary to make good decisions concerning their transaction. Purchasers may for instance decide to – after taking such advice – commission specialist structural surveys, demand the provision of relevant insurance policies, or, in some cases, pull out of a transaction altogether. Given the importance of the role of professionals in property transactions, they have a legal duty to act with reasonable skill and competence whilst providing their services.
If you believe that you have suffered losses because a professional who acted on your behalf when you purchased a property did not act with reasonable skill and competence, you may be able to sue them. The below sets out a recent development in the law which clarifies how much you may be able to sue them for.
A recent High Court case, Hart and another v Large and others , has highlighted the high standards with which professional advisors must conduct their work. Most importantly, though, it illustrates how the court will calculate the damages payable to a purchaser of a property if their professional advisor falls below those standards. In other words – in relation to a property transaction, how much does a professional’s incompetence cost him?
In Hart, the claimants bought, for £1.2m, a house which had recently been renovated and extended. The claimants had instructed a building surveyor (the defendant) to assess the property before they purchased it. There were various defects with the building, some of which the defendant reported to the claimant. However, the court held that, whilst the defendant had not been able to tell (because of the building’s rendering) whether adequate damp-proofing existed at the property, the defendant had effectively assumed that it did exist (when in fact it did not). Consequently, the defendant failed to highlight to the claimants the uncertainty regarding the damp-proofing. The defendant also failed to highlight various instances of sloppy workmanship. After the purchase had gone through, it transpired that the defects at the property were so bad that the necessary remedial works would cost the claimants over £300,000.
The defendant recommended to the claimants that they “should” seek a professional consultant’s certificate as to the quality of the building, but, in the circumstances, this was not enough for the defendant to be able to argue successfully that he had advised the claimants competently. The court held that the defendant, if acting competently, would have emphasised that obtaining the certificate was essential before going ahead with the purchase. This is because, if an architect’s certificate had been required before entering into the purchase, no such certificate would have been forthcoming. The court further reasoned that this refusal to provide a certificate would have caused the claimant to withdraw from the transaction. However, the defendant failed to advise that obtaining such a certificate was necessary, and the claimants completed the purchase.
In calculating the level of damages due to the claimant, the court considered that the defendant was liable for the diminution in the value of the property caused by all of the physical defects at the property, not just those defects which a competent surveyor would have reported. This was because, had the defendant acted competently, the claimant would not have entered into the transaction at all. This meant that the damages had to be calculated to represent the difference between: 1) what the value of the property would have been if it had only the defects as reported to the claimant in the defendant’s report and 2) the value of the property with all of the defects which had in fact existed when the claimants purchased it. The value of the property in the former scenario was held to be simply the £1.2m which the claimants paid for the property. The value of the property in the latter scenario was to be ascertained by establishing how much an incoming, hypothetical purchaser would pay for the property.
However, since the cost of remedying the defects would be so high, the court deemed that a prospective purchaser of the property in its actual state would have intended to demolish and rebuild it. This led the court to the conclusion that the diminution in the value of the property must therefore, in this case, be equal to the cost of demolishing and rebuilding the property, which was £800,000. The court reduced this sum to £750,000 after hearing (and agreeing with) the defendant’s argument that a more attractive building would be created after a complete rebuild, and this benefit to the claimant had to be accounted for in the award of damages.
Additionally, the two claimants received £7,500 each for the inconvenience and distressed caused to them by the defendant surveyor’s incompetence.
*Paul was assisted by Tom Knightley, trainee solicitor, on the drafting of this article.
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