A licensed valuer in WA provides a valuation report for mortgage purposes. If the valuation is found to be negligently prepared, who may have a cause of action against the valuer?

Q: What is the correct answer to: A licensed valuer in WA provides a valuation report for mortgage purposes. If the valuation is found to be negligently prepared, who may have a cause of action against the valuer?

The correct answer is Both the person who commissioned the valuation and any party who the valuer knew or ought to have known would rely on it, such as the lending institution. Option B is correct because a valuer owes a duty of care to both the commissioning client and any third parties (such as lending institutions) who the valuer knew or ought to have known would rely on the valuation. Both may have a cause of action for negligence.

Q: What background knowledge is needed for this Valuation question?

The duty of care to third parties was established in landmark cases like Kenny & Good Pty Ltd v MGICA. For mortgage valuations, the valuer knows the lender will rely on the valuation to make lending decisions. If the valuation is negligently inflated, the lender may lend more than the property is worth and suffer a loss if the borrower defaults.

Q: What is a good way to remember the answer to this Valuation question?

A negligent valuer can be sued by the client AND any third party they knew or should have known would rely on the report, especially lenders. For mortgage valuations, always think: the lender will rely on this. If negligent, both the client and lender can claim.

Q: What exam tip applies to this Valuation question?

The key test is FORESEEABILITY — who would the valuer reasonably expect to rely on the report? That person can sue.

Q: How does this Valuation concept apply in Australian real estate practice?

A valuer overvalues a Joondalup property at $750,000 (actual value $550,000) for a mortgage purpose. The bank lends $600,000 based on the valuation. The borrower defaults and the bank sells for $530,000, suffering a $70,000 loss. The bank sues the valuer for negligence and recovers damages.

Question

ValuationWAHARD

A licensed valuer in WA provides a valuation report for mortgage purposes. If the valuation is found to be negligently prepared, who may have a cause of action against the valuer?

Answer Options

A

Only the person who commissioned the valuation

B

Both the person who commissioned the valuation and any party who the valuer knew or ought to have known would rely on it, such as the lending institution

C

Only Landgate, as the regulatory body

D

No one, as valuations are opinions and cannot be negligent