Revisiting professional negligence claims for secured lenders

We are all too aware of the financial difficulties many individuals and businesses are currently experiencing, and sadly this means we can expect to see an associated increase in mortgage defaults. Therefore, banks’ and lenders’ recoveries teams may be looking for alternative sources of recovery.

After the 2008 financial crisis, our specialist banking professional negligence team saw a substantial uptick in claims against professionals arising out of secured lending. Just like post-2008, recoveries teams might now consider bringing claims against professionals who advised them about the security property – for example solicitors or valuers. Those professionals tend to be supported by insurance which offers a potential solid source of alternative recovery.

Something to look out for is a substantial drop in value of the security property. Perhaps the bank/lender has taken steps to realise the security (such as appointing Law of Property Act Receivers) but the price obtained/now expected is substantially lower than the valuation obtained at the time of the lending. That might indicate negligence by the original valuer (which could be for all sorts of reasons – for example: inappropriate comparables were used, too much reliance was placed on an outlying valuation factor, or floor/property areas were incorrectly calculated).

A substantial drop in value might also suggest a potential solicitors’ claim – if, for example, the drop in value is a result of a title issue which should have been identified on the report on title and the bank/lender should have been advised accordingly. Even if there is no drop in value, but there is a title issue (about which it was not advised) which would have put the bank/lender off lending, or lending as much in the first place, there may be a claim.

Another common issue is a failure by solicitors to register the bank’s/lender’s charge over property, effectively leaving the bank/lender vulnerable as an unsecured creditor. This can be particularly problematic if another bank/lender has registered a subsequent charge.

All banks and lenders suffer loss from time to time, and in tough times they might be looking to recover losses elsewhere, and to put money back on their bottom line. Ashfords has many years of experience successfully recovering money against professionals in these circumstances.  

If you have any queries about this article, please contact Rory Mac Neice.