Self-employed builder Emmet Scullion was awarded £72,000 after a Surrey court ruled a surveyor had overstated the rent he was likely to make on a two-bedroom flat in Cobham.
The court was told Mr Scullion paid £352,950 for the property once he was told it could raise £2,000 a month in rent - but the most he was ever able to let it for was £1,000 a month, which left him struggling to cover his costs.
The court ruled the surveyor owed a duty of care to Mr Scullion even though the landlord had made his own enquiries about the viability of the transaction. The case also means a surveyor could be liable to an investor for incorrectly valuing a property.
“It’s a really significant judgement because so many investors bought buy-to-let properties when the market was booming,” says Alexandra Anderson, a partner at law firm Reynolds Porter Chamberlain. “Many other claims by disgruntled landlords could follow.”
The £72,000 award included mortgage costs and other losses due to the rent not being sufficient to cover the landlord’s costs. Projected rental income is one of the key factors used by lenders when granting a buy-to-let mortgage. Normally, the monthly rent received has to be at least 120 per cent of the mortgage repayment.
Stephen Ludlow, director of estate agent Ludlow Thompson, which specialises in the buy-to-let sector, said: “The floodgates could open, with a surge of claims from owners of new-build properties arguing they overpaid for properties because surveyors exaggerated the rent.
“Overvaluing rents has been more common in the new build market where there is less of a track record for valuers to base rental estimates on.”