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Lenders urged to bring legal action against valuers and solicitors as repossessions rise

  • 07/10/2019
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Lenders urged to bring legal action against valuers and solicitors as repossessions rise
Law firm Shoosmiths has reported a rise in enquires from lenders relating to professional negligence claims against solicitors or valuers as repossessions have risen.


UK Finance data for Q2 showed that repossessions were up by 15 per cent against the same period last year.

The number of properties repossessed in the UK was 1,270 in the three months April to June.

Shoosmiths said it was usually only in repossession cases that the original mortgage transaction was reviewed and underlying flaws discovered.

A rising number of repossessions “can be a sign that borrowers overstretched at the time of the original mortgage and that the transaction may have been materially different to the one that lenders were originally led to believe,” the firm said.


Price discrepancies

Underlying flaws in the original transaction can include a failure by solicitors or valuers to disclose the true purchase price or value of the property.

Such discrepancies may include undisclosed discounts, buyer incentives or if the property was subject to a back-to-back sale where it was sold in a matter of months before the lender transaction at a lower price.

Such situations all potentially indicated that the value of the property was not disclosed fully to the lender at the time of the transaction.

Matthew Howarth, partner at Shoosmiths, said: “This would mean that the lender lent on a purchase where the value was falsely overstated, often exceeding 100 per cent of the actual value of the property.

‘If there has been material non-disclosure of incentives or back-to-back transactions by the professionals involved, then lenders should consider whether the losses they suffer in the value of their security were caused by the conveyancing solicitor or valuer. This can make a significant difference to any potential shortfalls they are facing on their loans.

“We’ve seen a rise in enquiries from lenders seeking advice on investigating professional negligence claims,” Howarth said.

“Recently, a buy-to-let lender approached us after reviewing a transaction. It became apparent that the stated purchase price, which had been confirmed by the completing solicitor, was false and, therefore, they had breached their duties of care. We successfully recovered financial damages for the lender,” he added.

Howarth is head of Shoosmiths Leeds office and a member of the Professional Negligence Lawyers Association. He has particular experience in grouped claims for lenders where multiple mortgage transactions are subject to professional negligence claims.

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