Buy-to-let landlords have the law on their side, Clear Property Investment learned this week.
This is because an investor took a surveyor to court and won after he was erroneously quoted a rental income twice that of what he actually received.
The outcome of the case has caused ripples of angst amongst surveyors who are awaiting with dread hundreds of similar court disputes. In turn, it's caused many a buy-to-let investor to review their own circumstances and consider legal action.
The 'test case' concerns an amateur buy-to-let investor who went ahead and purchased a property based on the fact his surveyor told him he could expect an income of £2000 a month. In practice, the landlord received only half this amount and ended up selling the property at a loss. In court he claimed the surveyors owed him a 'duty of care' and were liable for his loss of rental income and the costs of both purchasing and selling the property. The judge agreed with the plaintiff.
"This is really significant because so many investors bought buy-to-let properties when the market was booming. Surveyors and their insurers will be concerned that the judgement could lead to many other claims by disgruntled landlords that their lenders' surveyors over-estimated the potential rental returns," Alexandra Anderson of London law firm Reynolds Porter Chamberlain told The Observer newspaper.
The offical verdict of the judge in the aforementioned court case was that Colley's over-estimated and were liable for the landlords costs. They placed too much reliance on the sale price of the flat which breached industry guidelines established by the Royal Institution of Chartered Surveyors (RICS). Colley's refused to comment on the case but insisted their criteria had not changed.
Meanwhile life is hardly rosy for buy-to-let investors. The number of mortgages available in this category have fallen from 3000 in 2007 to 250 today. Lenders thse days are also insisting the valuation of a property's rent is at least 125 per cent of the mortgage payments. Previously it was 110 per cent.
David Dalby, of RICS said a surveyor should always look at comparables.
"There's plenty of public information about capital values but there are far few details available on rental values," he said. "There's no lettings database that's the equivalent of the Land Registry, for example."
For further information on what the test case means and how it might apply in your own circumstances, don't hesitate to contact our property investment experts.
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