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

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  • Neil Crosby
  • Anthony Lavers
  • John Murdoch

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 The valuation variation analysis is extended to previously unpublished data, including the performance of expert witnesses themselves, where the paper identifies a striking contrast between the experts' assertions as to the size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.

Suggested Citation

  • Neil Crosby & Anthony Lavers & John Murdoch, 1998. "Property valuation variation and the 'margin of error' in the UK," Journal of Property Research, Taylor & Francis Journals, vol. 15(4), pages 305-330, January.
  • Handle: RePEc:taf:jpropr:v:15:y:1998:i:4:p:305-330
    DOI: 10.1080/095999198368310
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    References listed on IDEAS

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    1. Gerald Blundell & Charles Ward, 2008. "The Accuracy of Valuations - Expectation and Reality," Real Estate & Planning Working Papers rep-wp2008-14, Henley Business School, University of Reading.
    2. Gerald R. Brown & George A. Matysiak & Mark Shepherd, 1998. "Valuation uncertainty and the Mallinson Report," Journal of Property Research, Taylor & Francis Journals, vol. 15(1), pages 1-13, January.
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    Citations

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    Cited by:

    1. Kwame Addae-Dapaah, 2001. "Valuation Accuracy - A Problematic Enquiry," ERES eres2001_101, European Real Estate Society (ERES).
    2. David Geltner & David C. Ling, 2006. "Considerations in the Design and Construction of Investment Real Estate Research Indices," Journal of Real Estate Research, American Real Estate Society, vol. 28(4), pages 411-444.
    3. Steven P. Devaney & Stephen L. Lee & Michael S. Young, 2007. "Serial persistence in individual real estate returns in the UK," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 25(3), pages 241-273, May.
    4. Martin Hoesli & Elion Jani & André Bender, 2005. "Monte Carlo Simulations for Real Estate Valuation," FAME Research Paper Series rp148, International Center for Financial Asset Management and Engineering.
    5. Neil Crosby, 2007. "German Open Ended Funds: Was there a Valuation Problem?," Real Estate & Planning Working Papers rep-wp2007-05, Henley Business School, University of Reading.
    6. Irene Cheloti & Manya Mooya, 2021. "Valuation Problems in Developing Countries: A New Perspective," Land, MDPI, vol. 10(12), pages 1-20, December.

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