£10m valuation for site now worth £1m flawed, judge rules
A £10m valuation put on a site purchased by a Northern Ireland housing association was irredeemably flawed, a High Court judge has ruled.
Mr Justice Horner held that the assessment for land in Belfast - now on the market at around a tenth of that price - was outside a permissible range of error.
Helm Housing Association is suing chartered surveyor Myles Danker Associates (MDA) for loss and damages it allegedly suffered in a deal to buy the site at Great Georges Street in 2007.
It paid £9.75m for the plot near the M3 flyover as part of plans to build up to 200 homes.
Following the collapse in Northern Ireland's property market later that year the site is now estimated to be worth around £1m.
Helm has faced criticism from the Department for Social Development for purchasing land being "flipped on" by another company - Lacuna Developments - after it paid £6.5m for it.
The court heard the housing association would not have bought the site if MDA had not supplied the £10m valuation. Funding from DSD was also based on the chartered surveyor's report.
In a preliminary issue in the case, the judge had to determine whether the £10m valuation came within an acceptable range.
Helm argued that it should be limited to 10% on either side, while the defendant contended that 15% either way should be tolerated.
Mr Justice Horner said MDA should have disclosed to Helm that it had valued the site for the bank funding Lacuna. He described this as a serious error, pointing to an obligation under the Royal Institution of Chartered Surveyors guideline book. "Helm will undoubtedly wish to understand why disclosure was not made, especially as the Ulster Bank was funding Lacuna's purchase of the site and it was very much in Lacuna's interest for the valuation of the site to be as high as possible," he said.
According to the judge, the sale of the site to Lacuna in March 2007 for £6.525m provided the best evidence of market value and should have formed the basis of any subsequent valuation.
"To have omitted any reference to this sale either in the December 2006 valuation to the bank or in the March 2007 valuation to Helm is completely inexplicable and displays a complete failure in understanding how market value should be assessed," he added.
With further evidence still to be heard in the case, the judge emphasised that many of his conclusions were provisional.