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Lenders that make loss on homes may sue valuers

Lenders that make a loss selling properties after repossession could recover substantial damages from the valuers and solicitors who advised them on the purchases, says law firm Optima Legal.

Optima, which provides property, debt recovery, litigation and dispute resolution legal services, says the recession is revealing considerable levels of negligence among professional advisers.

Philip Robinson, partner at Optima, said: “In the present economic climate, pursuing borrowers may prove fruitless but in some cases lenders could recoup some money from the valuers and solicitors who acted for them when they made the advances.

“If a lender has suffered a significant loss of, say, over £20,000, now would be a good time for it to review its shortfall files for evidence of professional negligence.”

He advised lenders to examine mortgage valuation reports prepared by valuers to establish if they overvalued properties, leaving them with properties worth significantly less than the valuations they were given.

He said they should also look closely at conveyancers’ reports on title prior to the completion of mortgages, which should certify that there were no problems with either properties or borrowers that should have been brought to their attention.

Robinson said: “Firms rely on these reports to decide whether to lend and if so, how much.

“Failure to disclose information that would have altered a decision – for example, that a conveyancer had acted for both vendor and purchaser or that a property’s value was inflated by sales which took place in the preceding six months – could be seen as negligence.

He added: “When the economy falters and house prices decline, negligence is revealed in the way a receding tide exposes shipwrecks. In the early 1990s a large number of lenders brought claims against their advisers.”

He said that lenders suffering big losses when selling properties after repossession should closely examine their lending, arrears, repossession and sales files as well as their conveyancers’ files.

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