Recommending Further Investigation.
In light of the Heart v Large and the home survey standard
In this article Hilary Grayson and Nik Carle review section 4.9 of the new RICS Home Survey Standard in light of the judgement of Hart v Large and concealed building elements.
The new RICS Home Survey Standard (HSS) came into effect on 1 March 2021. Section 4.9 (Further Investigations) states:
The RICS member’s knowledge will, at times, lead to a suspicion that a visible defect may affect other concealed building elements. In these circumstances, an RICS member must recommend that a further investigation is undertaken.
However, the RICS member must not recommend a further investigation just because a given building element is inaccessible within the confines of a normal inspection. Examples include where the covering of one roof slope cannot be seen from any reasonable vantage point, but there is no evidence of defect in the roof void. In such cases, RICS members should inform the client of the restriction and advise on the implications. The RICS member should exercise professional judgement and must not call for further investigations only to cover him or herself against future liabilities.
Where a further investigation is recommended, the RICS member should include the following information in the client’s report:
• a description of the affected element and why a further investigation is required
• when the further investigation should be carried out and
• a broad indication of who should carry out the further investigation (for example their qualifications, membership of a trade body, competent person scheme).
How comfortably does this now sit following the recent case of Hart v Large?
The need for new standards
Let us remind ourselves why we have the new Home Survey Standards (which we refer to as HSS in this article).
Before the publication of the new standards, it had been identified that there were excessive documents of varying status produced by RICS over time for use by RICS members and regulated firms when delivering condition-based home surveys. Feedback from members, consumers, and industry found that the various guidance and practice statements were often confusing, applied inconsistently, and were out of step with the rapidly changing world and the requirements of consumers in that world.
In January 2018, RICS formed a technical working group to review the entire home survey guidance suite. The working group identified the following risks:
• Standards not being applied consistently.
• Lack of consistency on the service delivered by home survey practitioners to consumers.
• Client complaints/dissatisfaction and consumer needs not being met.
• Lack of consistency in products being developed in the marketplace.
• Lack of clarity on mandatory guidance requirements for delivering home surveys.
• RICS existing guidance not reflecting the evolving role of technology.
• Lack of prominence of professionals’ skills and role in the home buying and selling process.
• Consumer confusion on the importance of home surveys; difference between survey and valuation; and the different survey service levels delivered by home survey practitioners.
The review clearly identified the need for a professional statement providing a set of concise mandatory requirements for all RICS members to ensure a consistent approach in serving the changing needs of the market and helping improve the home buying and selling process.
There was nothing controversial about these conclusions. For years there had been discussion about how out of step with consumer requirements the HomeBuyer Report was, and it was widely acknowledged that there was consumer confusion about the difference between different levels of inspection and report. This has been most notably around lender valuation reports which for years have been erroneously referred to as ‘surveys’ by many involved in the home-buying sector.
Consequently, stakeholder engagement was sought, a working party convened, and a technical author appointed. The new ‘Home Survey Standard’ was born.
Hart v Large – summary of the key points
Although a lot has been covered in the press and on social media recently, it is also worth revisiting the case of Hart v Large. This is a case where a surveyor had carried out a HomeBuyer Report and was subsequently found to be negligent in the execution of that report.
The surveyor, Mr Large, provided a HomeBuyer Report including a valuation for his clients, the Harts. The property in question was valued at £1.2million. This was in 2011.
The property had some key features:
- It was a clifftop property on an exposed site
- It was originally built in the 1920s
- It had very recently (before the surveyor’s visit) been subject to considerable remodelling and refurbishment.
The surveyor recommended and carried out a HomeBuyer Report. (This was queried as being the right level of service for the situation, but the judge found it to be an acceptable product and so the surveyor was not negligent on this point.)
Although this article is looking at Paragraph 4.9 of the new HSS, it is worth noting that Paragraph 2.4 Client Liaison addresses the relationship with the client, and importantly that they understand the differences between the level of service.
2.4 Client liaison – RICS members and RICS regulated firms must take all reasonable steps to ensure that clients:
- understand the differences between the levels of service, including the extent and limitations of each option
- are advised of the range of options the RICS member can offer, together with the key features and benefits of each
- are aware of the fee that will be charged for the service and
- agree the terms of engagement
- agree report format and method of delivery and
- explain the intended future use of the property (for example buy to let).
Clients may not be familiar with the range of choice available and will require advice on which level best suits their needs. The RICS member or regulated firm should confirm the client has access to appropriate information before any contract is formed.
Where instructions have been received from a third party (for example, from a lender or a panel manager), the RICS member or regulated firm should satisfy themselves the instruction is best suited to both the property and the needs of the client. Where the RICS member finds the instruction is not suitable, the client should be given the reasons why and advised on the appropriate level of service.
So, the surveyor was not negligent by offering and carrying out a HomeBuyer Report – it was the execution of that service that was found to be negligent.
But it is worth noting that the judge did make it clear that just because a surveyor agrees on a level of service in advance of conducting the inspection, they are under a continuing obligation to consider if that level is appropriate, up to and including responding to any queries after the completion of the report.
The surveyor reported to the client that the drainage and sewerage disposal arrangements required further investigation. However, the surveyor noted that the damp proofing measures could not be seen and did not recommend further investigation as there were no signs of failure of the damp-proof measures at the date of the inspection.
Because this was a refurbishment and remodelling of an existing property, there was no NHBC protection. In such situations, a Professional Consultant Certificate (PCC) can be used instead. But in this case, there was no PCC, or in other words, no builders and/or architects guarantees. If something were to go wrong, there was no recourse to the builders and/or architects who caused the building defects once the vendor, who had commissioned the refurbishment work, had sold the property on.
The surveyor did recommend that both Building Regulation certification and guarantees should be checked by the solicitors and later, in response to further queries, he advised the claimants that it would be reasonable to request a PCC to certify that the work had been supervised and to provide recourse against the architect in the event of problems.
As we now know, after the claimants had bought the property numerous problems emerged. The claimants pursued claims against their solicitors and the architects who had supervised the work for the vendor, as well as the surveyor, but only the claim against the surveyor went to trial.
PCCs and guarantees were talked about by the surveyor, but the judge found that the service provided by him was not just a valuation, but also to advise the client about the purchase of the property. If the surveyor had clearly reported on investigating the damp further and that a PCC was vital for their protection, then the client would not have purchased the property, or would not have done so without pursuing the PCC. The losses suffered by the client were a direct result of this lack of clear, unambiguous advice from the surveyor. In other words, what the surveyor should have done was to emphasise in the report that a Professional Consultant Certificate (PCC) was essential in this case.
At the trial, the judge also found that the surveyor should have recommended further investigation of the damp-proofing provision as it could not be seen (216). There was a specific area by the front door where wind-driven rain ingress had occurred (168) though, as with all other areas of the property, the judge found that there was no evidence of dampness or water ingress at the time of the inspection (162).
There has been a lot of debate on the way the damages were determined, and there is no space to go into that in this article, suffice to say that this was the basis of the appeal. In essence, the judge found that the Harts would have pulled out of the transaction, had the surveyor been specific and unequivocal on recommending further investigation on the damp proofing and that an Architect’s Certificate be obtained.
For those who might be in a position to claim against their surveyor, Hart v Large is a boon. The Court of Appeal tried hard to portray the decision as fact-specific:
“ … This was not just a case about a failure to spot, and draw attention to, certain defects that one might expect to be picked up on a HomeBuyers’ survey. It was about a failure by the surveyor to convey to the clients (i) the limitations of the protection that the survey afforded them, because there were material risks which he was unable to assess, and (ii) in the light of this, the need for them to take further action in the form of further investigations and, crucially, obtaining a PCC, which was essential …”
The ‘key point’, which Lady Justice Andrews underlined at the end of the judgment, was that “… Mr Large failed to say what he should have said to the Harts about matters that were fundamental to whether the transaction should go ahead. If he had said those things, they would not have bought the property …”
The difficulty is, however, that almost all ‘missed defects’ claims feature the allegation that the claimant would not have bought the property if they had been properly advised in the first instance. So Lady Justice Andrews’ ‘key point’ is hardly very distinguishing.
Meanwhile, the prohibition in paragraph 4.9 of the HSS could not be clearer: “… The RICS member should exercise professional judgement and must not call for further investigations only to cover him or herself against future liabilities …”
All of this leaves surveyors in some jeopardy, potentially.
The Terms of Engagement guidance document launched alongside the HSS sets out the minimum requirements to include before appointments are confirmed. There are several important protections touched on here, for example:
N. Liability: “… Where possible, a disclaimer should be included in both the terms and conditions and the report, relating to any errors or omissions in the report caused solely by any inability to inspect relevant areas …”
O. Client liaison: “… RICS members must take all reasonable steps to ensure that clients understand the differences between the levels of service and are advised on the range of options the surveyor can offer. If possible, they should include information on the services offered before any contract is drawn up. Where the RICS member finds the instruction not suitable, reasons should be given and the client should be advised on the appropriate level of service. RICS members should keep under review the level of survey required for the particular property and advise the client if they consider the level of survey should change for any reason. Members should keep clear notes on any advice provided regarding the level of survey and any changes to that advice, and make clear any limitations to the advice given …”
However, in the wake of Hart v Large, surveyors need to be vigilant (and perhaps more selective) about the jobs they take on.
If they are able to develop a keen ‘sixth sense’ for properties that may be problematic or risky, that will be the signal to increase the fee quote and/or to introduce exclusions, disclaimers and limitations of liability into the engagement materials.
Defensive reporting and calling for further investigation
Surveyors have often faced criticism from both clients and the legal profession for failing to make the appropriate judgement call and simply call for further investigation without applying any judgement based on the evidence available. It does not take much time to find comments like this on various consumer forums on the internet:
“There is no point in getting a survey. They are full of caveats or recommendations to carry out further investigations.”
We have all heard ‘horror stories’ where the further investigation suggested has been ridiculous. Bryan Hindle of Brick-Tie Ltd recently cited on a Property Care Association training event that he has seen plenty of
examples where surveyors have recommended further investigation of cavity wall ties, only for him to turn up to a solid wall property.
Of course, if somebody asked the Harts, they might say that there is no point in getting a survey because they do not contain enough information about further investigations.
Clearly, the correct position is somewhere between the two. And this is the challenge that the new HSS tries to address – where that correct middle ground should be. And there is the nub of the problem – because it is going to vary from customer to customer and property to property.
That said, paragraph 4.9 of the HSS is quite helpful here:
“…. However, the RICS member must not recommend a further investigation just because a given building element is inaccessible within the confines of a normal inspection. Examples include where the covering of one roof slope cannot be seen from any reasonable vantage point, but there is no evidence of defect in the roof void. In such cases, RICS members should inform the client of the restriction and advise on the implications.”
Let us unpick this statement.
• Inform the client of the restriction – this is a straightforward matter of fact; what I could not see and why I could not see it
• Advise on the implications – this is where surveyors are going to have to rise to the challenge. What the RICS is saying here is just because you cannot see something, that, in itself, is not enough to justify further investigation. The surveyor must have a sound reason to do so.
What follows from this is that no surveyor should be carrying out an inspection and submitting a report on a property without a full understanding of the way that property is likely to have been constructed, the materials used and the way those materials perform over time and in situ.
It also suggests a greater emphasis on desktop research both before and after an inspection. There is now a lot of information on the internet providing historical pictorial evidence of many properties. For instance, Rightmove now contains a lot of historic photographs of properties evidencing changes over time.
The importance of desktop research
Case Study 1 – Victorian end-terrace
The property in question was a newly refurbished, end-terrace, late Victorian brick-built house. It had two bedrooms; a single storey, flat roof rear extension (probably from the 1960s); and a loft conversion. Although the floors would have been suspended timber, the ground floor now had all solid floors.
The client was known to the surveyor socially. She was a single mother with two children on a limited salary. The surveyor was aware that the client was looking for a new home as the family home was being sold, and had suggested that she should consider a more detailed condition survey. The client was getting a small mortgage and she had a large deposit from her share of the equity of the family home. A valuation inspection had been done on the property and the valuation report had raised no concerns.
The survey identified a number of issues, not least of which was significant problems with damp – far more than you would normally expect even for a moderately well-maintained Victorian house.
But this property also had a loft conversion. There was no indication how old the loft conversion was, but the surveyor noted the following issues (in addition to the damp chimney breast mentioned in the summary of dampness):
1. Lack of fire doors
2. Lack of escape windows
3. Inappropriate balustrades
But possibly, the most alarming issue was the roof structure.
The surveyor noted that the gable end wall was leaning out slightly at the top. But even before getting on site the surveyor had done some research on the history of the property and had found photographs showing the inside of the loft conversion. It was clear that the purlin had been removed at some time. This photograph was included in the report for the client’s information.
At the time of the inspection the purlin had been replaced – or rather a new beam was visible in the loft room. What was not visible, however, was the detailing showing how the beam was attached to the gable end wall or the party wall. For all the surveyor knew, the ‘new beam’ could simply have been hanging from the rafters (and the lack of care around the damp issues suggested that the refurbishment was not to a particularly high standard).
The surveyor correctly recorded the roof structure as ‘Not Inspected’, because it was concealed behind plasterboard and decoration. Specifically, in the report the surveyor did not call for further investigation of the purlin. Although a report was later prepared, the surveyor called the client from site and expressed concern about the roof structure based on what she had seen in photographs on the internet and spelt out, in no uncertain terms,
the potential risks posed (making a detailed note later to record the essence of this conversation).
This conversation with the client confirmed that this addition to the roof structure, which had occurred during the seller’s occupancy, had not been declared on any paperwork provided to the solicitor.
While the defect at the top of the gable end wall was clearly visible to the naked eye, this illustrates just how important it is to research before going on site. In this case, the surveyor really struck lucky, finding a photograph of the loft room without a purlin, and then reviewed against photographs taken while on-site, which clearly show a replacement timber of some sort.
In this case, the surveyor did not recommend further investigation – instead, stating quite clearly that there was no evidence on site to suggest that a replacement purlin had been installed correctly and reiterating the implications of that.
The purchaser pulled out of the transaction. She did not have the resources or energy to address the defects with the property. It was not the right property for her.
This was a brave thing for the surveyor to do. The client was, in effect, made homeless and the estate agent was incandescent. Although predating the new Home Survey Standard, this was fully in the spirit of paragraph 4.9.
Case Study 2 – Westbury Farmhouse
Westbury Farmhouse is a Grade 2 listed property dating from 1670 (with some parts likely to be older) and with a substantial extension that was built in the 1950s. The roof has multiple pitches. All are visible from ground level except one – the slope to the rear of the roof on the oldest part of the building. Here the pitch joins with the flat roof, also not visible from the ground.
Inspection of the roof void is considerably restricted due to the presence of a known bat roost.
Although formerly a residential property, it is now occupied by an arts charity but is nevertheless a good example of complicated residential property.
The Trustees commissioned a building survey in 2020.
The surveyor did not suggest further investigation of the area of the pitched roof that could not be seen. He could tell from the rest of the slope that the clay tiles had largely delaminated with the likelihood of the roof needing a significant overhaul in the next 5-10 years.
Also, he could not see the fixings, but his knowledge led him to believe that the nails used to fix the tiles were likely to be iron and therefore subject to corrosion. There was already evidence of some slippage on the slopes that could be seen.
He did not call for further investigation of the unseen roof slopes or to arrange consent for further access to the loft space. He did not need to. He could deduce their likely condition from the other, visible slopes and his construction knowledge.
The flat roof, however, was a different matter. There was no documentary evidence as to the age or material used, but oral evidence from some of the resident artists suggested that it was more than 10 years old. Therefore, knowing that flat roofs have a limited life span, he correctly suggested a drone flight to check the condition of the flat roof and provided an addendum to the report following that inspection.
In our opinion, this would be fully in the spirit of Paragraph 4.9 of the HSS.
The power of the word ‘because’
The powerful word that surveyors are going to have to get used to using in reports to justify further investigation is the word ‘because’.
“I recommend further investigation of the hidden flat roof because I believe the roof to be at least 10 years old, I am unable to verify the exact construction and condition and roofs of this type usually have a life span of only approximately 15 years.”
Such an approach is not a caveat as it informs the purchaser.
We do not believe that Hart v Large changes anything in relation to the Home Survey Standard. There are a few summary points to remember:
- It is imperative that even if surveyors agree on a level of service with a client in advance, they should continue to keep this advice under review before, during and after the inspection.
- Surveyors should always be aware of their duty to recommend a full level 3 inspection and report where necessary (and record that they have done so).
- As part of any research, both before and after the inspection, surveyors should remember that the internet has created lots of opportunities to discover things about the property that might not have previously been accessible.
- ‘Because’ is a powerful word to explain why something was not inspected and to justify further investigation.
- If a repair, improvement, or remedy has not been in place long enough to determine whether or not the detailing is sufficient for the environment, that is a legitimate reason for further investigation.
- Further investigation can relate to documentation from third parties – not just exposing a detail or carrying out another, more disruptive investigation.
- It is acceptable to tell a purchaser not to proceed unless certain issues have been addressed/seen (such as documentation).
But the key thing is to ensure you report anything that has not been inspected with an explanation as to why you were unable to do so.