Wednesday, 16 April 2014

Defending a bad valuation: Reading between the lines of the surveyors £100k victory

It seems like conveyancing solicitors have become the punching bag for industry errors.

While the £100,000 sum ordered to be paid in a recent court decision against Goldsmith Williams made the headlines, two points caught my eye.

The surveyors’ case is that the law firm failed, in breach of the terms of its contract with the lender, to advise that an applicant for a mortgage against a Peak District property had been registered as a proprietor for less than six months. He'd paid £390,000 for the property - much less than the surveyors’ value of £725,000 - and E-Surv argued that it would have realised its mistake if the solicitors had flagged up the relevant history.

The first point is that Goldsmith Williams are not the first and won't be the last in failing to comply with a lender requirement. It must be recalled that the CML conditions reflect some fundamental duties of solicitors. Insurers recently revealed that over 50% of cases against property lawyers are lender driven. One way to reduce the chance of ensuring lender compliance is to have comprehensive checklist -countersigned off - something that insurers have been recommending for years. This was indeed the logic behind the building of COMPLETIONmonitor. The software checklist has a direct question that picks up the whether the borrower had owned the property for less than 6 months and whether the lender had been notified. Flag raised, problem likely avoided.

Second point is the irony in a news story from August 2012 headlined "Call for Second Valuations to Fight Fraud". Although the story is primarily about avoiding fraud, second valuations would of course put the onus of valuations squarely in the court of the valuer. The story quotes a solicitor's admonition that "If fraudulent valuations are an issue with lenders, then having a second independent valuer go out is going to assist that enormously".  The solicitor? Goldsmith Williams solicitors’ partner Eddie Goldsmith.

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