VALUATION & THE LAW
Negligence & Property Valuation: Methodology & Margin of Error Theory. A brief summary of the case law that has evolved around determining negligence in valuation practice. This article attempts to summarise case law surrounding margin of error theory.
precise conclusions”.2 The It has been widely recognised The general standard for that there is permissible range unpredictability of the professional negligence is best for values, and it follows that if a described by assessing what the property market can often result in imprecise valuation value lies outside of this range, professional actually did and this is a strong indicator that the conclusions, and an comparing this with what a reasonably competent member of allowance made for this when valuer has been negligent. the profession would have done determining the threshold for Meagher JA stated that the permissible margin of error is a valuer’s professional in their shoes. When negligence. Brown, Matysiak 10% in most cases, but can be determining whether a valuer extended to 15% in exceptional and Shepherd further has exercised reasonable skill circumstances.5 This range will and care, the extent to which the expand on this concept, generally be applied to expert valuation departs from the ‘true noting that valuers tend to evidence. However, whilst the value’ of the property is the best interpret information margin of error provides a guide, starting point. However, as it has differently, resulting in Meagher JA went on to state that differing opinions of value been famously noted by many, “it is not a statement of some valuation is best viewed as an art, that are based on the same principle that no valuation evidence.3 Watkins J not a science. Whilst the value within the bracket can, as a of the property is the first pla e concludes that “two able matter of law, be negligent.”6 to begin, this is not a conclusive and experienced men, each Although as Bellew J stated, indication of negligence, and the confronted with the same “when the valuation is so far valuation methodology and ways task, might come to different removed from the true value in which the valuer arrived at his conclusions without anyone of the property … (it can be) being justified in saying that conclusion must also be satisfied that the (valuer) was either of them has lacked examined. negligent in preparing it and competence and reasonable providing it”7, indicating that an care, still less integrity, in “Valuation is an art, not a egregiously wrong assessment doing his work.”4 science” may sometimes be enough to As Goddard LJ stated, establish negligence with little Margin of Error Theory & further investigation. It must be ‘valuation is very much a matter Test of opinion … we are all liable to noted that this test cannot be The ‘margin of error’ theory considered a sole determinant make mistakes, and a valuer is started as an approximate certainly not to be found guilty of negligence, but rather that it of negligence merely because his indication of what could be calls into question the skill and valuation turns out to be wrong’.1 expected from a reasonably care of the valuer. Watkins J expounded on this and competent valuer and has noted that “valuation … is a task subsequently evolved into an informal test for negligence. which rarely, if ever, admits of AVI ISSUE 2 2021 PAGE 11
