David Wilson of Worthingtons Solicitors Commercial department considers an ongoing case which could have significant implications for lenders and valuers alike.
The Belfast office of Colliers is being sued by Aurora Leasing Ltd claiming that a Colliers’ estate agent was ‘grossly negligent’ in a valuation of a property in South Belfast in 2008.
On the strength of the valuation from Colliers International Belfast Ltd, Aurora Leasing lent the homeowner approximately £1million, using the property as security. When the homeowner later defaulted in his repayments there was so little equity in the house that Aurora was unable to recover any of its money. Having seen negative reports about the NI property market in early 2009, Aurora queried the valuation however as late as May 2009 Colliers confirmed the £5 million still stood.
In December 2009, when the homeowner had defaulted in his repayments, Aurora obtained a new valuation which assessed the house as worth a maximum of £2.5million. Aurora won a judgment for almost £1.3million in October 2010 but by then there was insufficient equity in the house to enforce the judgement.
Aurora Leasing Ltd are now seeking to recover some of that money from Colliers. Counsel for Aurora, Mr Hanna QC, has argued that their valuation had been "indefensibly high" and their expert witness told the court that by May 2009 the house value was just £1.8 million.
This is disputed by Colliers expert witness, estate agent Gerry O'Connor, who said that Terrace Hill House was a "special property" which would have been "immune" from the fall in the market in 2008. Although he stressed that a valuation was a matter of opinion, Mr O’Connor gave a valuation of just £3.75 million, and conceded Colliers "might have to admit they erred". Gerry Simpson QC, Counsel for Colliers, said he would explain how the planning consents had added significantly to the property's value and that he would also cite contributory negligence by Aurora due to their failure to do proper due diligence checks.
This case continues and we await with interest the outcome of this case which could potentially have implications for valuers and lenders alike.
David Wilson is a Partner in the Commercial department of Worthingtons Solicitors. Should you have any queries in relation to this article please submit your enquiry in the form below and a member of our Commercial team will be happy to respond.