Property Valuers’ Duty of Care: Avoiding negligence claims  

A. Introduction

There are several reasons why property valuation is crucial to securing credit facilities These include, first, the need to assess the value of the property offered as collateral to determine the loan amount. A precise valuation ensures the bank is not lending more than the property’s worth. Second, accurate property valuation helps banks manage risk by ensuring they have sufficient security to cover the loan in case of default. Third, the value of the property can influence the interest rate offered by the bank. Higher-valued properties may attract lower interest rates due to lower risk. Fourth, the CBK Prudential Guidelines[1] require that credit facilities are well secured. The collateral should be sufficient to cover both principal and interest.

• Legal Definition of Duty of Care

Duty of duty of care is the responsibility of a person to avoid acts that could reasonably be foreseen to cause harm to others. It requires individuals to act with the care and consideration that a reasonable person would in a similar situation. In the context of property valuation as collateral, the duty requires that valuers provide accurate, unbiased, and thorough property values. Failure to exercise reasonable skill and care could lead to financial loss for the bank.

In Gulf African Bank Ltd v Hanif Tours & Travel Agency Limited & 4 others[2], The Plaintiff bank instructed a valuer to undertake valuation of the charged property so that it could advance credit facilities to Hanif Tours. Based on that valuation of Kshs. 180,000,000 and a forced sale value of Kshs. 135,000,000, the bank advanced to Hanif a facility of USD 300,000 which Hanif Tours failed to service. It is when the bank wished to exercise its statutory power of sale that it turned out that the valuer valued the wrong property and that the value of the correct property was so low that an attempt to sell it was futile. The bank opted to sue the borrower and the valuer. In the judgement delivered on 25th January 2025, the Court[3] held:-

It is not disputed that the 4th Defendant was contracted by the Plaintiff to conduct a valuation of the charged property. The evidence on record confirms that the 5th Defendant, the 4th Defendant’s director and agent, relied on the owner and a third person, the Assistant Chief to guide him to the property’s location. The 5th Defendant confirmed during cross-examination that he did not confirm the location of the property independently as required of a professional valuer. He also cofirmed that the RIM would guide him to the location of the charged property but he could not explain why he could not find the correct location of the charged property yet he used the same RIM as NW Realite. Based on the above, I find that the 5th Defendant is a professional valuer and that he had a duty of care to the Plaintiff to give a professional opinion on the value of the charged property that would be relied on to give the 1st Defendant a loan facility. I also find that he breached that duty of care by failing to independently verify the correct location of the charged property. I further find that there is a link between the breach of duty and the loss suffered by the Plaintiff because the negligence.

Consequently, the court found the borrower and the valuer liable for the amount advanced and interest.

• What is the scope of the duty?

In Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20, the Supreme Court of the United Kingdom held that the scope of duty principle is that a defendant is liable only for losses which fall within the scope of his or her duty of care to the claimant. The court further held that the scope of the duty of care assumed by a professional adviser is governed by the purpose of the duty, judged on an objective basis by reference to the reason why the advice is being given.  When evaluating the scope, one looks to see what risk the duty was supposed to guard against and then looks to see whether the loss suffered represented the fruition of that risk. The question to be determined is whether there is a sufficient causal link between wrong advice and the loss.

Equally important is the purpose of the advice being given. The Court[4] said:

“The scope of the duty of care assumed by a professional adviser is governed by the purpose of the duty, judged on an objective basis by reference to the purpose for which the advice is being given…”

Similarly, in Meadows v Khan[5], the court held:

“In addressing the scope of duty question in the context of the provision of advice or information, the court seeks to identify the purpose for which that advice or information was given. Where the claimant has asked for advice about a risk or about a proposed activity which involved that risk, the court asks: ‘what was the risk which the advice or information was intended and was reasonably understood to address?’.”

Trans-National Bank of Kenya Ltd V Charles Kimita Willy & Another[6] is a local case where the valuer had valued the wrong property and admitted as much during the hearing.  The Court held:

“The 2nd defendant is a registered valuer. He therefore professes the professional skill of a valuer… as a registered valuer, he is recognised by the profession of valuers as a person who is trained and possesses the skill to undertake valuations on instructions of the members of the public. When the Plaintiff instructed the 2nd Defendant to undertake the valuation of the suit property, the Plaintiff expected the 2nd Defendant to use reasonable case and skill that is required of a professional valuer to value the property and give his opinion as to the true value of the suit property… by accepting to be guided by a survey plan which was presented to him by the 1st Defendant, he denied himself an opportunity to independently verify if the said survey plan was genuine or not…I do hold that the 2nd Defendant was professionally negligent when he undertook the said valuation. He failed in his duty of care to the Plaintiff and therefore is liable to pay damages to the Plaintiff.”

Another local case is Kenya Commercial Bank v Philip Odongo Kabita T/A Odongo Kabita Valuers[7]. The Court in finding the valuer was negligent, held:

“I find that the defendant as a professional man duly instructed by the plaintiff owned a duty care to the plaintiff. He knew that a professional opinion which the plaintiff would rely on was required. I also find that he was in breach of that duty in that he did not proceed to value the property in accordance with the ordinary standard of care skill and diligence expected of a professional valuer. Instead of identifying the property using the accepted professional tools of a certificate of official search and a registry index map for the relevant registration section or a copy of the mutation survey plan if the registry index map was not helpful, he relied on and was misled by the borrower. To err may be human, but for a professional to err as a result of not applying professional skills and tools is negligence in any language. I also find that the Bank suffered loss as a result of the defendant’s negligence.” (emphasis ours).

• The standard of reasonable care

Also known as The Bolam Test, aptly namedafter the case ofBolam v Friern Hospital Management Committee[8]. The Bolam test defines the minimum standard of care that a doctor (or any skilled professional) must provide to avoid being found guilty of negligence. It focuses on whether the professional’s actions align with the consensus among their peers. This rule states that if a doctor reaches the standard of a responsible body of medical opinion, they are not negligent. A person falls below the appropriate standard, and is negligent, if he fails to do what a reasonable person would in the circumstances. But when a person professes to have professional skills, as valuers do, the standard of care must be higher.

• Conclusion

Overall, property valuation plays a vital role in the lending process by ensuring that both the bank and the borrower have a clear understanding of the property’s worth. A valuer who conducts a valuation without adhering to the standards of the professions risk being held liable for the loss suffered by the bank.

[1] Guideline on Licensing of New Institutions CBK/Pg/01

[2] 2025] KEHC 486 (KLR)

[3] Lady Justice Mongare

[4] Lord Hodge and Lord Sales

[5] [2021] UKSC 21; [2021] 3 WLR 147

[6] 2006] eKLR

[7] [2002] eKLR

[8] [1957] 1 WLR 582

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