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Buying property following negligent advice

View profile for Mark Ridley
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When faced with a professional who is proven to have given negligent advice, a court’s first objective will be to try and make an award which places the claimant in the position they would have been in, had the professional not been negligent.

This seems straightforward enough, but the task becomes more difficult when the professional’s negligence has played some part in persuading the claimant to buy property from a third party.

In many cases, a buyer will obtain advice from several professionals before entering into a property purchase, for example, a lawyer, a buying agent, or a surveyor.  Each professional plays a part in making sure the buyer has at least a basic understanding of any major risks involved in the purchase.

Negligence by any one of those professionals could lead to risks going unnoticed, and when they are discovered, the buyer might say they would never have purchased the property.  However, by then, it will often be too late to reverse the transaction.

With the buyer being ‘stuck’ with their purchase, the court will need to use its imagination to consider how best to make an award which meets the above objective. 

The recent judgment in Moore and another v National Westminster Bank provides further confirmation that in doing so, the court’s preference will be to turn to ‘diminution in value’.

Diminution in value requires the court to consider the hypothetical price that the buyer would have paid for the property had they been fully aware of the risks which a professional failed to bring to their attention.   The difference between this and what the buyer actually paid, is known as diminution in value, and forms the basis of measuring the award to be made to the buyer. This is not an easy exercise, not least of all when the buyer in truth would say had they known all the facts, they would have never bought the property at all!

In the case of negligence by a surveyor, a buyer may find themselves owning a property in a state of disrepair.  In the past, courts have been inclined to make their award based purely on the cost of carrying out remedial works to address such repairs; however, particularly since the case of Philips v Ward [1956], this approach has often been dismissed in favour of diminution in value.

That said, the price paid by a buyer, less the costs of remedial works to address latent disrepairs, will often provide the basis for the buyer’s hypothetical purchase price. This tends to mean each approach can produce the same or a similar outcome.

Whether commercial or residential, negligent advice can affect any purchase of property.  At BakerLaw we have the expertise you need to make sure you get the best deal should a dispute arise.

This article is not a definitive statement of the law. It is designed as a free update on the law at the time of publishing. It is not a substitute for legal advice on specific facts and circumstances. BakerLaw LLP and/or the writer accepts no liability or responsibility for reliance on this article and recommends that you seek independent legal advice on your specific circumstances prior to taking any steps.

 

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