How to sue your surveyor if the valuation is wrong

How to sue your surveyor if the valuation is wrong

Falling property prices have turned the spotlight on valuations and the surveyors who provide them - especially in the fast-falling world of two-bedroom new-build flats.

Over the past weeks, Guardian Money has revealed how valuations issued as recently as last summer were up to 70% higher than their real worth while forecasts of rental income - essential for a buy-to-let mortgage - were overegged by as much as 100%.

Those who bought on these phoney valuations now face remortgaging at unaffordable rates, bankruptcy, or losing their own homes as lenders chase them for shortfalls.

Instead of going bust, owners can get even through the courts, say solicitors. "We've seen rental estimates for Docklands flats that are pure cloud cuckoo land: owners promised £2,400 a month rent who are lucky to get £1,200," says Graham Balchin of London lawyers Bolt Burdon Kemp. Balchin specialises in professional negligence - suing valuers, accountants, and other solicitors, as well as developers and sales agents.

"Some of these rental figures on valuation certificates are no more than fraud," he says. "One developer managed to get a £375,000 valuation on a flat in Docklands. But by the time incentives, cashbacks and so on were counted, the real price was £280,000. The client, who is suing, then managed a mortgage for £282,000. Now he'll be lucky to get £210,000 for the flats."

Balchin has already won £100,000 from a surveyor.....continued below

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and a lawyer who overvalued three flats in northern England. "The solicitor was well connected to the developer, and failed to tell buyers that similar flats in the same condition were selling for half the price. The valuer was complicit in this." He expects a wave of business now the two-bedroom-flat bubble has burst.

But before buyers reach for their writs, here are some ground rules to help decide whether to sue or not.

· Get a retrospective valuation - a second opinion from a firm that is independent of the developer, based on the date of the original purchase. Ensure that the new valuation looks at genuine market prices. Don't forget you pay a premium for new-build because you often get a new kitchen or bathroom, but you can never sell the property again as a new.

· Be aware that many valuations are based on "comparables" by the same developer. Developers sometimes sell flats to family and friends at inflated prices so valuers have something on which to base their figures.

· Check out sales history and prices of similar properties at the Land Registry at www.landregisteronline.gov.uk. Neighbours can sometimes help.

· Find out real rent levels from independent letting agents in the area.

· Don't take action unless the valuation is at least 10% wrong. Valuers are allowed a margin of error. But if the valuation is so reckless that no reasonable surveyor would come up with it, then claim.

Where a professional are deliberately dishonest, you can bring a "tort of deceit" case. But fraud usually means the valuer's professional indemnity insurance is invalid.