Valuer not Liable for Valuation Inaccuracy

Valuation, as any valuer will tell you, is an imprecise art. Claims against valuers for negligent valuations are therefore notoriously difficult to sustain. Recently, the court heard a claim brought by investors in hotels that a valuer had neglected to take into account a 'turnover rent'.

The turnover rent was calculated in such a way that the rent payable by each hotel increased if the turnover exceeded a certain figure, but it was in effect based on a 'rolling average' so that if the turnover was less than the target figure, the shortfall 'rolled forward' against the subsequent payments. The result was that the rent would not rise above the base level until the whole of the shortfall was made good.

When the valuer prepared his valuation, he did not take the shortfall provision into account in working out when the increase in rents was likely to occur.

Investors, who had invested in the hotels after an offering by an intermediary, claimed this was negligent, that the valuations were overstated as a result and that the valuer was in breach of a duty of care to them.

The court agreed that the valuer did owe a duty of care to the investors. However, there was no evidence that the intermediary had relied on the valuation. The intermediary had been informed about the shortfall clause and had created prospectuses which omitted parts of the valuer's valuation.

In any event, the valuation produced was within a 'reasonable bracket' of the acceptable range of valuations. Although the valuer's methodology could be criticised, the valuation was sufficiently accurate not to justify a claim.

Contact Clare Magill for advice on any commercial property law matter.