Negligence

Question 1

What is negligence?

Answer 1

Duty of care exists to clients and third parties using ‘reasonable care and due skill’.

When breached and there is a loss, claim for damages arises.

Breach of duty of care which results in damage(s). Leading case – Yianni v Edwin Evans (1981) established that resi valuer instructed by mortgage lending institution could owe duty of care in tort to mortgage purchaser relying on valuation.

Question 2

What do we mean by margin of error in relation to negligence?

Answer 2

Permissible range allowed by courts, for example in respect of valuation. Leading case – Singer & Friedlander Ltd v J.D. Wood (1977).

Usual margin of error can be varied, will be narrower for relatively straightforward valuation and wider for more complex one.

Principle of 10% margin of error was reinforced in K/S Lincoln and Others v CB Richard Ellis (2010) in respect of a valuation of 4 hotels in 2005.

Jude stated that appropriate margin for standard resi property may be +/-5% but for one off commercial property +/-10%, and if exceptional features margin could be +/-15%.

Question 3

Is there a limitation on negligence claims?

Answer 3

Limitation Act 1980. Current limitations periods for negligence are:

• Contract – 6 years from date of negligent act, breach of contract. Section 14a provides alternative period of 3 years from knowledge of damage subject to 15 years long stop from the act itself.
• Tort – 6 years from date claimant suffered loss

Question 4

How would a firm avoid negligence claims?

Answer 4

• Clearly understand client’s objectives.
• Confirm precise instructions in writing in the Terms of Engagement.
• Ensure competence.
• Undertake work in accordance with relevant RICS standards and guidance notes.
• Make detailed file notes and take photographs.
• Keep up-to-date with market / technical knowledge.

Question 5

How can firms cover / protect themselves from costly negligence claims?

Answer 5

• Professional Indemnity insurance.
• Mandatory for surveyors working in practice.
• Protects surveyors, clients and third parties against negligence claims when duty of care is breached and claim for damages arises.