32 Frederick Street

Contents

18 Standards of Practice

Professional liability and negligence

Building surveys call for in-depth professional and technical expertise if they are to be properly executed. Those who lack that expertise or have it but do not use it are liable if the job is done badly. The surveyor’s basic duty in common law is to exercise reasonable skill and care in providing advice. If this duty of care is breached the surveyor/valuer is laid open to a claim for damages in negligence. The standard is the same regardless of whether the individual is professionally qualified or unqualified. Therefore, a deviation from proper surveying practice may generate liability in negligence.

What are the standards of the average competent practitioner?

There are particular duties which are inherent in the surveyor’s job, which include:

having experience relevant to the task;
keeping up-to-date (technical awareness);
applying skill, knowledge and training to the particular task;
using the senses (sight, smell, touch, etc.) to note observable facts;
drawing appropriate conclusions and making certain they are reasonable;
using professional standards that reflect the current state of professional practice.

How does the standard vary with the type of survey job?

The standard of care may depend upon the service agreed upon, for example, the elementary standard in the valuation report, compared with a medium standard of the Homebuyer Survey and Valuation (HSV) and the high standard in respect of a residential building survey. This is commonly known within the profession as the ‘Triple Option’ (levels 1, 2 and 3).

Market valuations

Valuations are required for many purposes, the most common being the residential mortgage valuation (commonly known as level 1) for an institutional lender, but also private buyers and sellers often separately commission such reports.

The case of Lloyd v Butler and another (1990) concerned a mortgage valuation where the valuer failed to reach the duty of care expected in such cases. It was concluded that the typical valuation inspection should last 20-30 minutes and requires ‘someone with a knowledgeable eye, experienced in practice who knows where to look ... to detect trouble or the potential form of trouble’. Although not necessarily obliged to follow up every trail of evidence, the case inferred that the valuer must alert the lender/borrower to the risk where serious defects are suspected and that further investigations should be made before there is a legal commitment made to purchase.

If there are no clearly identifiable signs of suspected problems, or a surveyor misses defects because the signs are hidden or concealed, then it will be difficult to demonstrate negligence. This was one of the conclusions in Smith v Bush (1987).

Ninety per cent of individuals buying property rely entirely upon a lender’s valuation.

Homebuyer Survey and Valuation (HSV)

Effectively falling between a mortgage valuation and a building survey, the HSV (commonly known as level 2) is a form of limited contract which tightly defines the extent of inspection within its terms of engagement.

The HSV provides a standard pro forma report using headings covering structural elements and ‘urgent’ and/or ‘significant’ defects. This replaced the HBSV (Home Buyers Survey and Valuation) in 1997, which in turn replaced the former HBR (House or Flat Buyers Report) in 1993.

A high proportion of the problems that arise on this type of survey are simply because the parties are not sufficiently clear about the nature and scope of the survey. The client’s expectation is usually that the HSV is effectively the same as a building survey.

The amount of time spent on site is typically 90 minutes (SAVA HSV Benchmarking). There are no restrictions on the type of property that must be inspected under this scheme. This changed previous guidance which limited the scope to include only properties of standard construction built after 1800 with less than 2000 sq ft gross floor area.

Residential building survey

A residential building survey (commonly known as level 3) is intended to provide the buyer with the most extensive (and therefore the most expensive) report option. The inspection and report is limited to readily accessible parts of the property, and so unless the client makes specific arrangements with the owner to lift or move furniture, lift floor coverings and take up floorboards, the surveyor will not generally be expected to do so. The surveyor will not normally test the services, but may be instructed to coordinate electricians, heating engineers, etc. The precise extent of liability will depend upon the precise terms and conditions of engagement that the surveyor and client enter into.

The case of Hacker v Thomas Deal and Company (1991) involved a building survey (known then as a structural survey). The judge stated:

‘Bearing in mind that there is a difference between the various types of reports which are produced upon the sale and purchase of houses, and in particular, that this was not a valuation report but a structural survey ... which involves a detailed and thorough inspection of the property to be inspected ... it obviously involves seeing what there is to be seen through the eyes not of the layman but of the expert.’

The surveyor in this case was likened to a detective trying to anticipate problems, and to visualise what could be happening within the areas of the building which are inaccessible to the naked eye, but without actually disrupting the fabric, decorations or the fittings of the house. The judge went on to say that in this situation ‘one does not start going into all the little crevices in the hope of finding something unless there is some tell-tale sign which indicates that it would be advisable to do so’.

The courts clearly expect a greater standard of inspection, and a deeper knowledge and expertise is demanded in the case of building surveys compared to HSVs or valuations. Clients therefore appear to get what they pay for when it comes to the surveyor’s exposure to liability.

Home Condition Report

Although the role of ‘Licensed Home Inspector’ does not yet exist, and legal precedents have not yet been established, parallels can be drawn with the work of chartered surveyors engaged in carrying out surveys of residential properties.

What are the standards required to work as a Home Inspector?

The standards required to undertake home inspections under the proposed legislation, are contained in the National Occupational Standards for Home Inspectors. The standards have recently been approved by the Qualification and Curriculum Authority and they state that a Home Inspector will have skills and competence in:

Working in an effective and professional manner:
developing and maintaining effective working relationships;
managing your own time and resources;
developing yourself to improve performance;
conducting your work in a professional and ethical manner;
contributing to the safety and security of people and property:
contribute to the maintenance of health and safety;
contribute to the safety of self, colleagues and clients;
contribute to the safety of property;
contribute to the security of information.
Preparing for Home Condition Inspections;
identifying and agreeing client requirements;
making preliminary enquiries about the property;
Undertaking Home Condition Inspections to required standards;
inspecting the property for condition;
making complete records of findings;
interpreting evidence and determining condition ratings;
gathering information on energy efficiency;
Preparing and disseminating Home Condition Reports:
producing complete and comprehensive reports;
making reports available and maintaining own records.

Further information

The reforms are still in the process of development and changes to the detail of some of the proposals will undoubtedly take place before the final stages of implementation. Further information may be found by visiting the following websites:

Office of the Deputy Prime Minister:

see the page on the Home Information Pack

www.odpm.gov.uk/stellent/groups/odpm_housing/documents/divisionhomepage/033116.hcsp

see also ODPM Factsheet 7: The Home Information Pack available on

www.odpm.gov.uk/stellent/groups/odpm_housing/documents/page/odpm_house_030196.hcsp

The HICB Steering Group: www.thehicb.org.uk

Asset Skills: www.assetskills.org

Property Information Research Ltd: www.pirltd.org.uk

What types of procedural failings occur?

Quite distinct from the professional issues that may generate a negligence claim there are situations in which bad advice is given because of poor quality control or failure to follow very basic routines. The problem areas include:

lack of understanding between client and the surveyor;
the terms of business are unclear;
changes in instruction are unclear;
office records are not checked, kept up to date or retained;
inadequate time set aside to inspect the property;
inadequate, or lack of legible, site notes;
testing equipment is inadequate, faulty or is not used;
inspection is haphazard;
reporting style is inappropriate;
supervision of new staff and trainees is inadequate;
inadequate diary system;
poor quality suppliers to the business;
security of confidentiality breaches occur.

Increasingly, professional indemnity insurers are beginning to consider the following information prior to assessing relative risk and levels of premium for individual firms of surveyors:

the nature of activities within the practice;
qualifications of the staff;
previous track-record of the staff, and their expertise;
claims experience including fraud or dishonesty;
levels of fee income by job type;
size of job type;
number of valuations and surveys carried out by each surveyor in the practice;
geographical spread of work;
copies of standard Terms and Conditions of Engagement.

What are the most common traps and pitfalls for surveyors?

Surveyors are typically open to an action in negligence when they fail to:

carry out instructions;
have sufficient expertise;
inspect the property;
inspect relevant parts of the property;
follow appropriate trails of enquiry;
see or observe a defect or defects;
recognise a defect or defects;
follow routine procedures;
properly understand, appraise or diagnose a defect or defects;
prepare a clear, adequate and unambiguous report;
reach the appropriate conclusions.

Source: www.isurvlive.co.uk