Where there’s blame, there’s a claim: risk management tips for surveyors
All surveyors will be aware of the need for professional indemnity insurance, both as a requirement of RICS membership, and to protect themselves in the event of a claim. The post 2008 economic climate has seen claims against surveyors and valuers grow significantly and in this article we outline some key risk management tips to reduce the likelihood of a successful claim.
Scope the work and the extent of instructions
The primary basis of a surveyor’s duties to his or her client is in the contract of engagement between the surveyor and the client. The contract may be written or inferred from the conduct of the parties. Failing to do so will put the surveyor at a serious disadvantage should there be any subsequent dispute as to the terms of the instructions.
It is crucial therefore at the outset of every instruction, to think about who the client is and the purpose of the report (i.e. is it just to provide a valuation, or is it to also advise the client on the course of action to take). This should then be made clear both in the confirmation of instructions and the report itself. Indeed, the RICS requires valuers to confirm in writing the terms on which any valuation will be undertaken before provision of the report. These should include the identity of the client, the purpose and subject of the valuation, any assumptions or special assumptions, any restrictions on use or qualifications to the advice, the date of the valuation and the fee.
When considering a professional negligence claim against a surveyor, the Court will need to determine whether the survey is to provide information only, or is also providing advice (in accordance with the House of Lords’ decision in South Australia Asset Management Corp v York Montaqgue Ltd  AC 191 (SAAMCO). The former will restrict any damages (should breach of duty be established) to the difference in value of the property compared with the true value at the time of the report, as determined by the Court (known as the ‘SAAMCO cap’).
With the latter, all losses suffered as a result of a negligent survey may be recoverable.
Contents of the report
When writing the report, surveyors should consider whether the client is a lay person or a professional and tailor the wording accordingly. For example, where the report is to be relied on by a lay person, overly technical language should be avoided. Whoever the client, ensure that there can be no grounds for ambiguity. If advice is being given, this should be clear and unequivocal so that it cannot be misunderstood. Where an assumption is being made, it is crucial to identify the information relied upon and highlight further investigations or specialist reports if required.
Any defects should be clearly identified and again, should refer to the need to obtain a specialist report as necessary; one of the most common types of claim against surveyors is a failure to spot defects such as damp, rot, or subsidence. Certain defects call for a specific warning, such as dry rot and death watch beetle. The warning given must be sufficient; in Daisley v BS Hall & Co (1972) 225 EG 1553 the Court made clear that if the risk is high, the surveyor should warn the client not to go ahead with the purchase. Conversely, if the risk is very small, it is the surveyor’s duty to say so.
Where comparables are being quoted, surveyors should ensure that these are as close to the date of the survey as possible and in as similar properties as possible. Be wary of only using comparables from the same development as the subject property.
If unable to ascertain any fact, the surveyor should be clear and say so in the report and explain that he is therefore unable to express any opinion on it.
Generally speaking an over-valuation or missing a defect is not of itself negligent – the Claimant must still evidence that the surveyor failed to carry out his or her instructions with reasonable care and skill. The standard is that of the ordinary skilled professional exercising the same skill. It will not be lower for a surveyor with no professional qualifications or with limited experience of property in a particular area for example. Nor will it make any difference that no fee or a lower fee is charged for the services rendered.
Communication with the client
Surveyors should make sure that all their communications with the client are recorded in writing on the file (i.e. take a file note of all telephone conversations and/or meetings) and any key decisions and/or changes in the client’s instructions or the advice being given are documented. In addition, whenever any substantive advice is given orally, this should ideally also be followed up in writing to ensure that there can be no ambiguity as to the advice given.
The Court will usually always prefer contemporaneous written evidence over oral witness evidence at trial, when memories are more likely to have faded. Should the Court have to decide between competing accounts of a lay person and a professional (who of course also has the benefit of insurance and is expected to have documented his or her advice), the benefit of any doubt is more likely to be given in favour of the lay witness.
File retention and limitation
It is important to have a file retention policy in place and ensure that the complete file can be readily retrieved (whether electronic or paper format). A claim against a surveyor will generally become statute barred six years after the cause of action arose (subject to certain exceptions such as fraud or concealment). In contract cases the cause of action arises at the point of breach and in tort it does not arise until damage has been suffered (in surveyor claims there is often a concurrent cause of action in contract and tort). However, the Claimant may also be able to rely on an alternative limitation period under s 14A of the Limitation Act 1980, which provides a further three years from the date of knowledge.