RICS Home Survey Standard and Hart v Large

The recent case of Hart v Large has caused much discussion amongst members. RICS has asked Alexandra Anderson, Michael Porter and Katherine Cusack of RPC to consider the facts of the case and address surveyors' duties in light of this ruling and in the context of the new RICS Home Survey Standard, which is due to come into force on 1 March 2021.

You will see from the article contained below that the Court of Appeal stressed that this was an unusual case and that the findings should not give rise to a departure from the usual principles governing the measure of loss in claims against surveyors. In addition, the RICS Home Survey standard is robust and sets out clear expectations for members that would address the issues highlighted by the case.  

RICS will of course continue to engage with our members and the wider market to monitor this position and review how it may impact our current standards.

Paul Bagust, Head of Property Standards, RICS

The article below has kindly been produced by Alexandra Anderson, Michael Porter and Katherine Cusack of RPC. It should not be interpreted as formal RICS guidance.

For detail on RICS requirements, we recommend members refer to the content of the new Home Survey Standard and seek independent legal advice where necessary.

The decision by the Court of Appeal in Hart v Large (cited as Large v Hart at the Court of Appeal stage) was handed down in January 2021, with the Court dismissing the appeal and upholding the High Court's judgment. However, the Court of Appeal stressed that this was an unusual case and that the findings should not give rise to a departure from the usual principles governing the measure of loss in claims against surveyors.

Below, we consider the facts of the case and address surveyors' duties in light of this ruling and in the context of the new Home Survey Standard, which is due to come into force on 1 March 2021.

The High Court Case

The High Court case arose from a dispute between purchasers, Mr and Mrs Hart, and an experienced surveyor, Mr Large, whom they engaged to provide a RICS Homebuyer Report in relation to a newly refurbished property situated on a hill-top in Devon.  The report highlighted only minor issues with drainage problems and concerns with some gutters and pipes. Mr Large valued the property at £1.2m and Mr and Mrs Hart purchased it for that price.

Following the purchase, the property suffered serious problems with water ingress and damp.  The Harts brought a negligence claim against Mr Large. They also sued the conveyancing solicitors and the architects who had supervised the reconstruction works on behalf of the previous owners. The High Court found Mr Large was negligent in that he:

1. Failed to identify the significant damp problems at the property following his inspection; and
   
2. Failed to advise, either in his report or when the point was subsequently raised with him, that the Harts must obtain a Professional Consultant's Certificate (PCC) before proceeding with the purchase.
   

In its assessment of damages, the High Court held that, in this case, it was appropriate to diverge from the normal rule, established in the case of Watts v Morrow, that damages should be assessed on the basis of the difference between the value of the property as described in Mr Large's report and its value in its actual condition. Instead, the judge awarded damages based on the difference in value between the value of the property with the defects reported by Mr Large and its value with all of the defects which in fact existed. The judge awarded the Harts £750,000, which was reduced to £374,000 to take into account the out-of-court settlements with the architects and the solicitors. The award included £15,000 for inconvenience and distress, which is a high sum for this type of loss.

The Appeal

The appeal was limited to the measure of damages applied by the High Court. Mr Large argued that the correct basis of the measurement of damages was the diminution of value between the property as described in his report and its value with the defects that could have been identified, but which were missed. He argued that the principle in Watts v Morrow was such that, unless the surveyor provides a warranty as to the condition of the property, there is no basis for awarding damages to reflect the costs of repair.

Mr Large also argued that, were the decision to be upheld, this would radically alter the usual approach that Courts take in claims against surveyors.

Decision

The Court of Appeal highlighted "four critical findings" in the High Court's decision from which Mr Large could not escape:

1. He was negligent in the advice he gave about damp and damp-proofing;
   
2. He was negligent in failing to advise the Harts not proceed with the purchase without a PCC;
   
3. Had Mr Large given the appropriate advice, the Harts would not have proceeded with the transaction; and
   
4. Mr Large's negligence had deprived the Harts of "advice which was so fundamental to whether the transaction could go ahead that Mr Large should be held to bear the consequences of such advice not having been given."
   

On this basis, the Court of Appeal upheld the High Court's decision. Coulson LJ held that the measure of loss used by the High Court in this case was appropriate. He held that, whilst Mr Large could not have been expected to identify all of the damp-proofing defects, he should have seen enough to "give rise to a trail of suspicion which (taken together with the need for a PCC which would have covered all aspects of the rebuilding works in any event) ought in turn to have led him to give very different advice." 

The Court placed considerable emphasis on Mr Large's failure to advise the Harts to obtain a copy of the PCC. Coulson LJ agreed with the judge at first instance that Mr Large should have advised that, without a PCC, the Harts should not continue with the purchase. The advice was so fundamental that Mr Large must bear the consequences of failing to give that advice. The fact he was held liable for some latent defects unconnected with damp-proofing which he could not have been expected to find was a direct consequence of his failure to advise that a PCC was necessary before the Harts purchased the property.

Mr Large's legal team sought also to rely on the principles in SAAMCO and Hughes-Holland. They argued that Mr Large was not an "advisor" in the sense of these authorities and that a surveyor in a house purchase could never be considered to be the advisor. Further, they argued that the "advice"/"information" categories were binary and there could never be any sort of hybrid situation. Coulson LJ reviewed the authorities that explain the difference between 'information' and 'advice', before firmly rejecting these arguments and finding that the "advice"/"information" categories are not rigid and could overlap. In particular, he referred to the cases that draw a distinction between the role of someone providing information for the purposes of enabling a third party to decide upon a particular course of action (an 'information' case); and the role of someone providing advice as to what course of action that third party should take (an 'advice' case). Having reviewed the authorities, he reasserted the factual findings of the High Court which concluded that this was not a mere "information" case. He concluded that, while this could be considered a hybrid case, it was in fact much closer to an advice case, because Mr Large had failed to advise the Harts to take the course of action of requesting a PCC.

Coulson LJ agreed with the High Court's decision that any other means of calculating the diminution in value would give a very low figure and would not have compensated the Harts for the losses for which Mr Large was responsible. The conventional method for assessing damages would have only compensated the Harts for the simple defects that Mr Large should have reported but missed.

Large v Hart and the Home Survey Standard

As the Court of Appeal strongly emphasised, the decision turned on the unusual facts of the case and does not represent a departure from the principles governing the measure of loss in claims against surveyors.  Nonetheless, the implementation of the new Home Survey Standard (HSS) provides a good opportunity for surveyors to review their duties and obligations when carrying out building surveys of any kind.

We would emphasise a number of key areas that are relevant to the Hart v Large case and which are addressed in the HSS. However, all surveyors conducting buildings surveys must fully familiarise themselves with the whole of the RICS Professional Statement for the HSS and ensure they understand the mandatory requirements set out within it. 

Expertise and Type of Survey: In Hart v Large, the Harts claimed that Mr Large should have recommended a full building survey, rather than proceeding with a Homebuyers Report.  Whilst that allegation failed, it does give a reminder that surveyors must ensure they have suitable experience before taking on an instruction and that they have a duty to recommend the most suitable type of report to their clients based on the specific facts of their instruction. Surveyors should, therefore, research the property before agreeing to undertake the work and ensure they have the skills and technical knowledge required. They should also ensure they are familiar with the area in which a property is situated (see sections 2.2, 2.3 and 3 of the Professional Statement).

Further Investigations: In Hart v Large, the court criticised Mr Large for failing to follow the 'trial of suspicion' in terms of evidence of poor workmanship and, in particular, the lack of visible damp proofing in places where he should have expected to see it, so that he ought to have advised that further investigations were required.  Surveyors are not expected to be able to identify all concealed defects in a property, particularly if carrying out a visual-only survey. However, the key issue for surveyors is when and in what circumstances they should recommend further investigations.  Paragraph 4.9 of the HSS sets out what surveyors must consider when weighing up whether they should recommend further investigations. It states that a RICS member must recommend further investigations "if they have a suspicion that a visible defect may affect other concealed building elements".  This will, of course, require surveyors to exercise professional judgment and will depend on the type of survey, the type of property and all the surrounding facts. The key point to learn from the Hart case is that, where there is a "trail of suspicion", a surveyor must take reasonable steps to follow that trail, which may include recommending further investigations.  That trail may be a visible defect; or, as in this case, it may be the notable absence of something you would expect to see, the absence of which might suggest that there is a defect. In either case, the surveyor should consider whether to recommend further advice

Professional Consultants Certificates: In Hart v Large, the property had been significantly refurbished and the Court held that Mr Large ought to have recommended that his clients obtain a copy of a PCC from the vendors. Whether or not a surveyor should recommend obtaining a PCC will depend on the type of property. New builds, for example, will typically benefit from a NHBC (or similar) warranty. If, however, the property being inspected has recently been refurbished, a surveyor should recommend that their client obtain a PCC or similar in order to afford the client protection against concealed defects. 4.6.2 of the Professional Statement addresses this point and states that a "RICS member should ask the owner/occupier if they have any guarantees/warranties for any repair and alteration work carried out where practical". The failure to advise the Harts to obtain a PCC before proceeding to purchase the property was critical to this case – it was the main reason for the court applying a much broader approach to the quantification of damages – and practitioners should always bear in mind what protections (if any) a prospective purchaser may be able to obtain against the presence of defects which a competent surveyor would not be able to identify in the subject property.

Limitations:  Appendix B of the Professional Statement sets out the scope of inspections that are required for different parts of a property, depending on the type of survey.  Surveyors should list clearly within their reports any parts of a property which they were unable to inspect, with reasons why. Surveyors should refer to section F of the HSS Terms of Engagement for example wording.

Continuing Obligations: Surveyors should be aware that their professional obligations are ongoing and do not cease once they have completed a report. If they are provided with information after an inspection or a report has been produced, they should consider whether this affects their advice.