What does Large ruling mean for surveyors?

Following the conclusion of Large v Hart & Anor [2021] EWCA Civ 24 in the Court of Appeal – in which a surveyor, Mr Large, was found liable for the costs of repairing a property the Harts had purchased on the strength of a HomeBuyer Report he had provided – RICS organised a round-table discussion on the case and its potential impact for surveyors.

Has the decision altered how surveyors work? Will it lead to more expensive insurance cover or more frequent claims in the future? And what advice can RICS offer members to avoid a similar risk during their own works?

There had been some discussion as to whether it was necessary to obtain a professional consultants certificate (PCC) from the architect that had been responsible for inspecting or supervising the works, and when asked by the Harts if they should obtain one Large did not answer 'Yes': this is the point on which much of this case turns.

Following the purchase, the property suffered serious water ingress and damp problems. The Harts brought a negligence claim against Large as well as the solicitor and the supervising architect. Both the architect and solicitor settled, so the claim went to trial against Large.

Effectively, the judge treated this as what is known as a no-transaction case, which brings into play the principles established in South Australia Asset Management Corporation v York Montague Ltd [1996] UKHL 10. These principles had been applied in BPE v Hughes-Holland [2017] UKSC 21.

Because this was considered an advice case, Large was deemed responsible for all financial implications of the transaction, and therefore had to meet the cost of remedying all defects to the property.

The case was sent to the Court of Appeal, which upheld the original decision. Judge Coulson concluded that in order to compensate the Harts properly, it was necessary to take into account all the defects with the property rather than just looking at those that the court concluded Large had missed.

The case raises questions about what surveyors need to be doing to protect their clients and themselves. The key message seems to be whether there is a way to offload the risk of latent defects from the purchaser to a third party such as an architect or solicitor, so that the former is not responsible for defects that could not have been identified in a survey but that have a significant effect on the property value.

Following this summary of the case, round-table chair Paul Bagust of RICS opened the call to questions and discussion from attendees.

Alex advised that in this scenario the PCC should be requested. If refurbishment works have been undertaken – particularly where there has been an increase in the property by the proportion seen in this case – then a surveyor should advise the client seek a PCC. This at a minimum reduces your risk, because it means that the claimant cannot ask why they weren't told me that this was necessary. In Hart, the judge after all said that a PCC should have been requested, and the case is already being cited in claims.

As long as a surveyor has said to the client that there have been refurbishment works, it is the client's responsibility to check whether there is a PCC. Where there is a certificate the surveyor should obtain a copy. Once this is done then you as a professional have discharged your duty according to what was said in Large: that is, the client has been put on notice that seeking a certificate may be a way for them to protect themselves, and you have suggested they should get that protection.

When asked to provide a HomeBuyer Report, the question you should ask yourself is whether this offers an appropriate level of service. In this case it would not be – the property required a level 3 survey, which offers an extensive inspection of property condition, structure and fabric, and therefore Phil suggested that RICS' Home Survey Standard would have been more suitable.

In addition to requesting a PCC, a surveyor should consider individual elements, and explain to clients they need to check with legal advisers that the relevant Building Regulations have been fulfilled and that planning and contract documentation has been completed before going through with a purchase. This comprehensive approach is already outlined in the HomeBuyer Report, and therefore this can still be considered fit for purpose.

When asked how the case was affecting firms, Angela Chamberlain noted that her company is now providing level 3 surveys as a default and looking at its report format to identify appropriate risk levels. Each element of the property is now given a red, amber or green rating, and the report also outlines what the client needs to take account of and what further investigations need to be made, as well as providing the usual commentary on findings and advice.    

On the same question, Joe Arnold said that Arnold & Baldwin has gone through all its reporting to ensure that staff are asking the right questions of the properties surveyed, as well as double-checking whether level 2 or level 3 are required, and that its surveyors are raising the right queries with legal advisers. Both Joe and Gary Epps noted that the wrong outcome from this case would be a shift towards defensive reporting and a failure to give customers the right advice just so as to guard against potential liability. 

Gary reiterated Phil's point that, from a surveyor's point of view, complexity is perhaps the most important thing to watch for, and the correct product should be chosen on that basis. He also noted that if you request a PCC and are only offered a retrospective one, most lenders won't accept it, so surveyors should be very wary about what is or isn't included in a certificate.

Laurence responded by noting that it is likely to make surveys more expensive, as there is a shift towards providing continuous advice and further questioning of third parties, which will add up to hours of extra work. There is a worry that clients will not accept this extra cost or see it as an attempt to upsell them for no reason. It is also important that the public are asked to keep copies of construction plans, because it is commonly the case that clients do not have their plans, even with recently built properties, which has further implications.

Chris Rispin noted that the courts were extremely pedantic about how they looked at Large, and surveyors need to reflect the level of detail required in their reports to mirror this. He also noted that you detail repairs in a level 2 survey, but Large raises the question of whether this counts as information or advice, and he wondered what the implications of that are.

Alex reiterated that the Court of Appeal has said there isn't a clear demarcation between information and advice and there can be ambiguous situations, so surveyors need to be extremely careful to ask whether any advice given is going to the root of the transaction – in which case, it is less likely to count as information.

Paul asked whether any insurers could give their professional reactions to the case. Chris Moseley stated that there is nothing positive about Large, and from an insurer's point of view it emphasises that surveyors' work is high-risk, with a high frequency of claims as well as high costs. Chris noted that most insurers don't want to go to court and that his company would likely have wanted to settle if the surveyor were not absolutely certain of their position.

Adding to this point, Ian Bullock stated that clients are not generally aware of what a PCC is, so raising awareness is key. Furthermore, the client needs to be made aware of what information they need from their lawyers and how to act on that.

Andrew Peters also reiterated what was a common theme of the round-table: although the PCC is now more important, it cannot be requested or may not exist in every circumstance. It's therefore important that the request is proportionate to the work undertaken, and surveyors should ensure that the advice given to the client when the certificate is not available is also proportionate.