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Over valued Property: Don’t let the grass grow…

over valued property grass grow

What’s the harm if a property is over valued?  In the case of the buyer it’s worth giving careful attention.  The High Court struck out a claim against a bank by mortgage borrowers, filed in June 2019.  They claimed that the bank negligently misrepresented their mortgage and negligently overvalued their property, as it was time-barred under the Limitation Act 1980.

In October 2007, the borrowers purchased a property for £310,000, with a £248,999 mortgage. The lender sold it in April 2014 for £150,000, following possession proceedings.

In July 2012, the property was valued by a different valuer at £250,000.

Liability for the shortfall

The borrower had suspected that the property may have been over valued in 2007 when they received the lender’s valuation.   When the property was sold in 2014, they became liable for the mortgage shortfall. Only then did they realise the extent of the over valuation.

The borrower claimed that, had the lender not misrepresented the nature of the mortgage and the property value, they would not have purchased the property.

The Court found that the borrowers failed to prove misrepresentation, but was there an over valuation by the bank?

over valued property

Limitation period

Broadly, in certain negligence actions for “latent” damage, the limitation period is the later of:

  • six years from the date of damage
  • or three years from the date the claimant knows (or ought to have known) of the damage.  This is “the date of knowledge”.

The borrowers argued that the date of damage was April 2014 and the date of knowledge was March 2017. They alleged that the bank had concealed important facts, such that time did not start running at all until February 2017.

The Court’s response

The Court held that the borrower had suffered an actual loss when they bought the property in 2007.  They were time-barred and could not bring their claim with the time period conferred by the Limitations Act 1980.

The court sympathised with the borrower’s situation and acknowledged that they felt that they might have sufficient proof for a case of over valuation. The borrowers had filed several requests for information under the data protection legislation. However, it was held that the borrowers had the “broad knowledge” required by the Limitation Act 1980.  They held it was acquired by the time they filed their defence to the lender’s possession claim in April 2013, two months before the claim was filed.

It’s well worth giving prudent attention to the value of your prospective property.  Act on any suspicion of price and get alternative expert advice to be sure.  Just don’t let the grass grow.

don't let the grass grow

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