When deciding how much to lend to a customer under a secured loan, or whether to lend at all, banks, building societies and other financiers will often rely on the advice of a valuation expert to tell them the value of the property they are lending against. This allows the lender to gauge the loan to value ratio accurately and to make a lending decision on the basis of a reliable risk versus reward analysis.
Unfortunately, valuation experts do not always carry out their valuations with the correct standard of care and they can also fall foul of frauds perpetrated by rogue borrowers.
If a lender relies on an inaccurate valuation when deciding to lend to a customer, and that customer is subsequently unable to meet its repayments, the lender can find itself out of pocket if the property the loan was secured against is not as valuable as the lender thought.
Members of the team have acted for banks, building societies and other lenders in a variety of claims of this sort. Some examples include:
- Providing a building society with a bespoke service in conjunction with Wilberforce Chambers to act in a large book of claims against a number of valuers. The claims arose from the negligent over-valuations of commercial properties prior to the global financial crisis. When the borrowers later defaulted on their loans in the wake of the credit crunch, the earlier over-valuations caused the building society significant losses.
- We developed a client service agreement and reporting structure which was tailored to our building society client’s needs and allowed the building society to maximise its recovery whilst ensuring that the work was carried out a in a cost effective and commercial manner.
- Handling a professional negligence claim against a valuer in connection with the valuation of an entire housing estate valued at many millions. Each and every property on the estate had been overvalued causing significant financial loss to our client. The claim was successfully settled at mediation.