How to avoid getting caught out if your house survey doesn’t identify defects which will cost a fortune to repair

By Kate Fowler, Solicitor in the Dispute Management Team at Lupton Fawcett. 

As buying a house is a significant financial investment we are all advised to obtain a surveyor’s report prior to purchase to make sure there are no major defects that need to be repaired. But what happens if the report fails to identify fundamental issues with the property?

In the case of Philips v Ward [1956] it was established that the damages that could be claimed as a result of a negligent surveyor’s report would be the difference between the price paid for the property and the price the property would have been valued at had the defects been disclosed. This is known as the diminution in value of the property.

In this case a couple purchased a property for £25,000.00 but discovered that they needed to spend an additional £7,000.00 to remedy defects that had not been disclosed by their surveyor’s report. However, as the property was retrospectively valued at £21,000.00, the actual loss to the couple was calculated as £4,000.00.

It is easy to see how this method of valuation can lead to homeowners being offered a far lower financial settlement than is required to put the property into the state of repair that they believed it was in at the date of purchase.

However, a recent case in the Court of Appeal has suggested that this way of calculating damages is not an inflexible rule. In Moore v National Westminster Bank [2018] the bank failed to obtain a homebuyer’s survey report for their clients, as requested. As a result, the couple purchased a property for £135,000.00 and subsequently discovered that £115,000.00 worth of repairs needed to be carried out. It was determined that, while the facts of this case were slightly different, it should not be distinguished from a negligent surveyor case.

The Court of Appeal Judge held that, on the facts, the couple was entitled to recover damages assessed on the basis of the cost of repairing the defects in the property. It was argued that this approach made sense due to the facts of the case – the extensive defects, the fact that the repair costs were 85% of the value of the property in a reasonable condition and the suggestion by the bank’s expert that the diminution in value was only £15,000.00. The Judge stated that diminution in value is not an invariable rule and that it can, in an appropriate case, be determined by the cost of repair.

Following the result of this case, it is important to note that the diminution in value measure remains the default method for calculating loss in a negligent surveyor case. However, as this judgement shows, there may be circumstances in which damages can be more accurately assessed by reference to the cost of repairs.

For more information or to discuss a potential dispute of this nature, contact Kate Fowler, Solicitor in the Dispute Management Team on either 0114 228 3258 or kate.fowler@luptonfawcett.law