Property valuation variation and the 'margin of error' in the UK

Abstract

The paper aims to examine critically the margin of error principle currently used by the English courts as a test of negligence in valuations. In particular, it considers whether the 'bracket' of 10-15% which is routinely accepted by judges is justified by reference to existing empirical studies of valuation accuracy and variation. The paper traces the development, status and current operation of the margin of error principle through the case law, noting that the principle was originally put forward by valuers appearing as expert witnesses in negligence actions. It then reviews the previous empirical work on valuation accuracy and valuation variation, concluding that the latter is potentially of much greater relevance. The valuation variation analysis is extended to previously unpublished data, including the performance of expert witnesses themselves, where the paper identifies a striking contrast between the experts' assertions as to the size of 'error' which suggests negligence and the range of valuations actually put forward by the experts. The paper concludes that the margin of error principle, as it is presently applied by the English courts, is lacking in any empirical basis and indeed runs counter to the available evidence. Its use as a means of establishing negligence by a valuer is fundamentally flawed.