It is settled law that a Solicitor has a duty to report to a lender client information which a reasonable solicitor would realise might have an effect on the valuation or some other ingredient of the lending decision (Mortgage Express Limited -v- Bowerman & Partners [1996] 2 AER 836).  This has recently been endorsed again in the case of E.Surv Limited -v- Goldsmith Williams Solicitors [2014] EWHC 1104 (Ch).

In the E.Surv case, a borrower applied to a lender for a remortgage seeking a loan of £580,000.00.   

The surveyor had carried out a site inspection on 15th November 2005 and his notes recorded that he had been informed by the borrower that the property had been purchased around six years ago for £600,000.00.  The surveyor valued the property at £725,000.00. 

Unbeknown to the surveyor, in the mortgage application the borrower stated that the purchase price was £450,000.00 and that he purchased the property in October 2005.

With the instruction letter to the Solicitors, the lender enclosed a copy of the Mortgage Offer to the borrower dated 1st February 2006 and a copy of the Valuation Report valuing the property at £725,000.00.

During the course of the transaction, the Solicitor obtained office copy entries but failed to report to the lender that the property had been purchased within the last six months for substantially less than the valuation of £725,000.00.

The remortgage completed on 13th February 2006. The borrower defaulted and the lender suffered a loss.  As a result, the lender brought a claim against the surveyors, which had been settled in the sum of £200,000.00. 

The surveyors then brought a claim against the solicitors seeking a contribution.  Relying upon their interpretation of the CML Handbook read with the Practice Rules and the Certificate of Title, the Solicitors denied that they had any obligation to report on the discrepancy between the purchase price and the valuation as this affected the value and not title.  However, the Judge held that the CML Handbook is not intended to exclude the general obligation to exercise reasonable care and skill and as part of such general obligation, there is an obligation to report to the lender any information which comes into the possession of the Solicitor which has a material bearing on the valuation of the lenders security or some other ingredient of the lending decision.

Having satisfied the Judge that, had the solicitor brought the discrepancies regarding the purchase date and price to the surveyors’ attention, the surveyor would have produced a revised valuation and that in turn the lender would have been influenced by this revised valuation, the Judge allocated responsibility equally and ordered that the surveyors are entitled to judgment against the solicitors for £100,000.00 plus interest.

This case confirms that conveyancers’ reporting duties are potentially much wider than some may believe and are certainly not limited to matters relevant merely to title.  The CML Handbook is not regarded as being prescriptive and the Courts have clearly rejected the suggestion that the terms of the CML Handbook, Practice Rules or Certificate of Title, exclude a conveyancer’s duty to report information which a reasonable solicitor would realise might have an effect on the valuation or some other ingredient of the lending decision.  Whilst this duty may not arise where it is inconsistent with the express terms of the retainer or surrounding circumstances of the relationship (Nationwide BS v Balmore Radmore [1999] 1 Lloyd’s Rep PN 241) and where the source of information in question is not one which a Solicitor is required to obtain or to consider under any express obligations, it is quite clear that conveyancers are required to ‘think outside the box’ and not regard their role as being too limited.

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