A buy to let landlord has been awarded more than £72,000 compensation after a surveyor overestimated how much rental income could be earned on a flat.
The landlord, who was a self-employed builder, had bought the property to augment his pension.
When he applied for a mortgage, the lender engaged the surveyor to value the flat and assess how much rental income it would generate. The surveyor produced a report saying rent of £2,000 per month could be achieved.
Based on that report, the landlord went ahead with the purchase. He was relying on the rental income to pay the mortgage. In the event, however, he could only let the flat for £1,050 per month, which meant he could not meet the payments and eventually had to sell the flat at a loss.
He sold in 2006, a year before the downturn in the housing market.
The High Court held that the surveyor’s responsibilities were not limited to the mortgage lender which had engaged him to value the property. The surveyor had known that the landlord was a buy to let purchaser and would rely on the rental income to pay the mortgage.
The court held that a careful and competent valuer would have valued the flat’s rental value at about £1,100 per month – just over half the figure suggested by the surveyor.
It followed that the landlord was entitled to be compensated for the losses incurred when the rental income failed to reach the expected figure. The landlord was awarded £72,234 plus interest.
Legal commentators have described this as a landmark case which could lead to more compensation claims from landlords in similar situations.
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