In Moore v National Westminster Bank [2018] the bank was liable for breach of contract for failing to provide a Home Buyer’s Report to the borrowers and the borrowers were awarded damages based on the costs of the required repairs to the property.

In the above case, the borrowers requested a Home Buyers Report in their mortgage application in respect of a property they were buying for £135,000. A Home Buyers Report is a more thorough survey of the property than a simple valuation. In error, the bank failed to carry out the requested survey and offered the borrowers an advance of £81,000 based on the bank’s valuation of £135,000. Having received a mortgage offer, the borrowers understood that the Home Buyers Report results were satisfactory and therefore the bank was prepared to offer an advance to buy the property for the agreed purchase price of £135,000.

The borrowers had subsequently discovered that the property had serious defects which required extensive repairs, and therefore brought a claim for breach of contract against the bank. The borrowers argued that if they had received the Home Buyers Report, they would not have bought the property due to the defects the survey would have revealed.

The Court held the bank was in breach of contract for failing to obtain the Home Buyers Report and concluded that a fair measure to determine loss in this case was the cost of repairs and awarded damages of £115,000 to the borrowers.

The bank appealed against the decision arguing that the proper measure of damages must be based on the diminution in value rule established by Philips v Ward [1956], which involved an inaccurate surveyor’s report. According to Philips v Ward, the proper measure of damages is a difference between the value of the property in its assumed good condition and the value in the bad condition which should have been reported to the buyers. According to the bank’s expert evidence, the diminution in value based on Phillips v Ward should have been £15,000 and not £115,000. The borrower’s expert was not able to advise on a diminution in value as in his opinion the property could not be properly valued in its existing state.

The Hight Court dismissed the bank’s appeal on the basis that the diminution in value rule was not inflexible and there is no legal principle which states that an expert cannot use the costs of repair to determine diminution in value. Therefore, the High Court concluded that the judge had been entitled to award the borrowers damages based on the cost of the required repairs.

In view of the above case, one can summarise that although this was not appealed by the bank, if a bank fails to carry out a Home Buyers Report when a borrower asked for one, the bank may be in breach of contract and may liable for the costs of repair of the property defects.

For more information, please contact a member of our Property Team.

Mariya Thomas

1 October 2018