Defective Exit Fee Drafting in £7.5m Property Finance Claim

A group of international property development companies has brought a £7.5 million professional negligence claim against its former solicitors following the defective drafting of an exit fee agreement (‘EFA’) linked to multiple lending facilities

The EFA was intended to allow the claimants to exit their facilities without exposure to early or forced exit fees, limiting any payment to a longstop date or a profitable sale of a Central London property. While these terms were agreed in principle, the solicitors failed to reflect them in the final documentation or advise on the associated risks.

As a result, a refinancing event triggered an unexpected exit fee, forcing the claimants to secure alternative funding at short notice in adverse market conditions, resulting in significant financial loss.

Temple issued an ATE policy to the claimants, enabling them to pursue a professional negligence claim against the Defendant without the risk of incurring adverse costs if the case was unsuccessful. Furthermore, the ATE policy included an anti-avoidance endorsement to satisfy the defendant’s security for costs application.

The Temple Perspective

Complex funding and property development transactions often depend on precise drafting and clear advice on risk allocation. Where those protections fail, the resulting losses can be substantial.

Temple supports claimants pursuing high-value commercial professional negligence claims by providing ATE cover that mitigates adverse costs exposure and assists in responding to security for costs challenges.

Matter value: £7,500,000.

Case status:  ATE insurance policy issued, case ongoing.