Horses for courses
Posted: 23rd October 2011
It is generally accepted that property valuation is at best 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 that range 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 near £63 million cost of the property.
At the centre of thr dispute was a property that had been bought and used 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 with such developments, and the turnovers of the businesses fell well short of the predictions of the valuers.
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.