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Lender Claims in Property Litigation: a Guide Based on Experience

By Matthew Pascall, Senior Underwriting Manager

(Estimated reading time: 2 minutes 55 seconds)

Property litigation is familiar territory for Temple but one area that often features prominently are claims arising out of the valuation of property. These claims are inevitably cyclical – a down-turn in the economy prompts lenders to look to the property against which they may have lent in the past.

Occasionally this can reveal original valuations that appear alarmingly high in the context of what may be a falling market. The inevitable question is: Did the original valuer get it wrong and, if so, what can the lender do about it to protect its position?

Litigation is an answer, but a lender cannot assume that it will always turn out to have been the right answer. Professional negligence claims against valuers can be highly successful but are not always straightforward. A prudent lender should always mitigate the risks inherent in these claims by securing good litigation/after-the-event insurance – and Temple is ideally placed to provide it.

We have a wealth of experience in supporting claims against valuers.

What do we look for in a lender claim before offering cover?

We hope that the checklist below mirrors best practice for those undertaking these claims: –

  • In broad terms, what was the factual background to the decision to provide secured lending to the borrower?
  • What was the defendant valuer actually instructed to do? Was the defendant surveyor simply asked for a valuation or were they more closely involved in the lending decision itself?
  • What were the terms of the letter of instruction or engagement? Did the parties agree to limit liability in any way?
  • When was the original valuation provided? Are there any limitation issues?
  • Is there a copy of the original valuation? Does the original valuation set out the basis for the conclusions reached by the valuer? Does it contain relevant and helpful comparables?
  • How experienced is the expert valuer instructed for the purpose of the claim? How familiar, if at all, is the expert valuer with the location of the relevant property and the local property market?
  • What has the expert valuer been instructed to do? What questions have they been asked? Have they been asked to provide a short valuation, perhaps in an attempt to triage a set of possible claims? If so, how have they qualified their report? When is it intended that a full report will be provided?
  • What margin of error has the expert valuer allowed before feeling able to conclude that the original valuation was accurate?
  • How has the expert valuer approached the retrospective valuation for the purposes of the claim? Have they identified any available historical comparables? Are they relying on any form of indexation?
  • Are there any unusual features of the property or the local property market that might have affected the original valuation and/or the new retrospective valuation?
  • What losses is the lender seeking as a consequence of the alleged negligence of the valuer? Simply a difference between the “right” and the “wrong” original valuations (with interest) or something more? Notwithstanding the decision in MBS v. Grant Thornton[1], is this a case where the SAAMCO[2] cap still fits and should be applied?

[1] [2021] UKSC 20 [2021] 3 WLR 81.

[2] South Australia Asset Management Corp v. York Montague Ltd [1997] AC 191.

If you have a number of lender claims that need litigation insurance cover, we can discuss giving your firm delegated authority to insure these claims without having to refer the cases back to us. Alternatively, if you’d simply like to refer a case to us or discuss litigation insurance in general, either way please email matthew.pascall@temple-legal.co.uk or call me on 01483 514428.

Matthew Pascall

Senior Underwriting Manager
Read articles by Matthew Pascall

Matthew Pascall

Barrister Matthew Pascall joined the commercial team at Temple Legal Protection, as Senior Underwriting Manager in November 2017.

Matthew was called to the Bar in 1984 and joined Guildford Chambers two years later. Spending more than 30 years in practice there, he has comprehensive knowledge and experience of the commercial legal sector and is listed in the current Legal 500 as a Tier 1 barrister.

Previously Matthew had been providing ongoing consultancy services to Temple Legal Protection for some time and therefore has prior insight into the company and established productive relationships with our clients. His knowledge of the commercial legal sector and litigation practice is invaluable to the business and our clients, providing specialist experience to lead the commercial litigation insurance team.

 

Read articles by Matthew Pascall