Category: Insurance case law · Reviewed by Simon Temme, Account Executive · Last reviewed June 2026
House of Lords confirmed that a surveyor instructed by a mortgage lender owes a duty of care to the purchaser, and that a disclaimer of that duty is subject to the reasonableness test under the Unfair Contract Terms Act 1977.
Mrs Smith applied to the Abbey National Building Society for a mortgage to purchase a modest house. The building society instructed Eric S Bush, a firm of surveyors, to carry out a mortgage valuation report. Mrs Smith paid the inspection fee through the building society. The application form contained a disclaimer stating that neither the building society nor its surveyor warranted the accuracy of the report, and that any reliance on it by the applicant was at her own risk.
The surveyor inspected the property and reported that no essential repairs were required. In fact, the chimney breasts had been removed from the upper floors without adequate support being installed for the chimneys above. Approximately eighteen months after Mrs Smith moved in, one of the chimneys collapsed through the roof, causing substantial damage.
Mrs Smith sued the surveyor in tort. The companion appeal, Harris v Wyre Forest District Council, involved a local authority lending under the Housing Act 1980 using its in-house valuer. In that case the disclaimer was framed even more emphatically, with the application form stating that no responsibility was assumed.
The House of Lords heard both appeals together because they raised the same two questions: whether a surveyor producing a mortgage valuation for a modest residential property owes a duty of care to the prospective purchaser, and whether a contractual or non-contractual disclaimer of that duty was effective under the Unfair Contract Terms Act 1977. The factual context — a purchaser of modest means, a routine valuation, and a fee paid by the purchaser through the lender — was treated as central to the analysis.
The first issue was whether a surveyor retained by a mortgage lender owes a tortious duty of care in negligence to a prospective purchaser of a dwelling, in circumstances where the surveyor knows that the purchaser is likely to rely on the valuation without obtaining an independent survey. This question turned on the application of the principle in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 to a tripartite arrangement involving lender, surveyor and purchaser.
The second issue was whether a disclaimer of responsibility, contained either in the mortgage application or in the valuation report itself, was caught by sections 2(2) and 11(3) of the Unfair Contract Terms Act 1977, and if so, whether the disclaimer satisfied the statutory requirement of reasonableness. The point engaged the wider question of whether a non-contractual notice excluding liability for negligence is a “contract term or notice” within the meaning of the Act.
The House of Lords unanimously dismissed both surveyors’ appeals. Lord Templeman, Lord Griffiths, Lord Jauncey and the other members of the panel held that, on the facts of routine residential mortgage valuations for modest properties, the surveyor assumed responsibility to the purchaser and a duty of care arose. The surveyor knew that the purchaser had paid the fee, that the property was at the lower end of the market, and that the purchaser was almost certain to rely on the valuation rather than commission a separate survey.
On the disclaimer point, the House held that the Unfair Contract Terms Act 1977 applied to non-contractual notices excluding liability for negligence, and that the disclaimers in both cases failed the reasonableness test. Relevant factors included the inequality of bargaining power between the parties, the practical impossibility for purchasers of modest means to obtain an independent valuation, the modest fee charged, the availability of professional indemnity insurance, and the fact that surveyors were better placed to bear and insure the risk.
The leading speech of Lord Griffiths emphasised that the decision was confined to modest dwellings purchased for owner occupation, and that different considerations might apply to commercial property, blocks of flats or industrial premises where purchasers could reasonably be expected to obtain their own professional advice.
A surveyor instructed by a mortgage lender to value a modest residential property assumes responsibility to the prospective purchaser, who is known to be likely to rely on the valuation, and owes that purchaser a duty of care in negligence under the Hedley Byrne principle. A contractual or non-contractual disclaimer purporting to exclude that duty is a “notice” within the meaning of section 2(2) of the Unfair Contract Terms Act 1977 and is unenforceable unless it satisfies the reasonableness test in section 11(3). On the facts, the disclaimers failed that test because of the inequality of bargaining power, the purchasers’ practical inability to obtain independent advice, the modesty of the fees, and the availability of professional indemnity cover.
Smith v Eric Bush remains the foundation of modern surveyors’ professional indemnity exposure in the residential mortgage valuation market. Underwriters writing surveyor PI risk price the policy on the assumption that any mortgage valuation of a modest dwelling carries a potential liability to the lay purchaser as well as to the lender, regardless of any disclaimer in the valuation report. This duality of duty must be reflected in policy limits, aggregation language and excess structures.
The case is also the practical reason why the RICS Home Buyer Report and equivalent products carry carefully drafted scope limitations rather than blanket disclaimers. PI insurers expect their insured firms to use RICS-approved terms of engagement that delineate scope rather than attempt to exclude liability for negligence, since unreasonable exclusions will not survive challenge under UCTA 1977 and will not assist in defending claims.
For brokers placing surveyor PI, the case underpins the need to confirm that the proposer’s standard terms of engagement comply with current RICS guidance, that the firm carries adequate cover for cumulative valuation work, and that the policy responds to claims by third party purchasers and not only by instructing lenders. Aggregate limits, claims-made triggers and run-off provisions are all priced against the residual exposure that Smith v Bush leaves in place.
By Matt Bartlett, Director, on 2026-06-06. Next review: 2026-12-06.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-06. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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