Mortgage lenders may sue professional advisers, warns PI expert
Professional indemnity insurers have been warned to brace themselves for a surge in claims given the increasing pressure on the commercial and residential property sectors.
Flaxman Partners, a firm of independent professional liability risk consultants, said mortgage lenders may look to recoup their losses from defaulted loans by suing the surveyors, lawyers and accountants involved in the valuation, application and conveyancing processes.
Roger Flaxman, managing partner at Flaxman Partners, said: "The predicted decline in property values, a slowing economy and the inevitable growing number of repossessions and property owners defaulting on their loans is causing concern to PI insurers. Lenders will seek to recover their losses and could well go after the mortgage brokers, lawyers, accountants and surveyors who originally advised on the deals.
"History has shown that these claims can be difficult and expensive to defend; very often there is insufficient documentary evidence on the professionals’ files to give them a robust defence.”
He added: "Insurers are also seeing more evidence of mortgage fraud, driven particularly by organised crime syndicates, where professional advisers may have been induced to collude in the fraud by inflating values and misleading lenders. Combined with the prevailing property and financial market conditions, this could see a significant increase in PI insurance premiums together with a tightening of terms and conditions.”
