A buy-to-let landlord has won the first ever award in a landmark judgment against a surveyor who overestimated the rental income the landlord’s property would generate, according to City law firm Reynolds Porter Chamberlain LLP (RPC).

RPC say that it is the first time that a surveyor retained by a bank has been found to owe a duty of care to a buy-to-let investor seeking a mortgage.

In this case the landlord won the first ever damages for a buy-to-let investor against the bank’s surveyor for misstating the likely rental income to be generated by the property. The case also means that a surveyor could be liable to an investor for incorrectly valuing a property.

Alexandra Anderson, a partner at RPC, said: “This is a really significant judgment because so many investors bought buy-to-let properties when the property market was booming.

“Surveyors and their insurers will be concerned that the judgment could lead to many other claims by disgruntled landlords that the lender’s surveyor overestimated the potential rental returns from their property.

“However landlords should not think that they can make a surveyor pay for the impact of a collapse in rental demand. The rule that a surveyor is not liable for any losses caused by a fall in the market was clearly affirmed in this case.”

The court awarded the landlord just over £72,000, which reflected the losses the landlord had suffered that were attributable to the overstatement of the expected rental income. The award included mortgage costs and other losses arising when the rent made on the property was not sufficient to cover his overheads.

The survey was conducted by a surveyor retained by the bank providing the mortgage financing. Despite the fact that the landlord had made his own enquiries with property agents about the viability of the transaction, the judge still held that he was entitled to rely on the advice provided by the valuer to the bank and that the valuer owed him a duty of care to ensure that any advice on likely rental income would be accurate.

Case reference - *Emmett Thomas Scullion -v- Royal Bank of Scotland (trading as Colleys) [2010] EWHC 572 (Ch) and [2010] EWHC 2253 (Ch)