Colliers International has been found liable to an issuer of a securitised loan for the negligent valuation of a commercial property. This is the first time that an issuer of commercial mortgage backed securities (CMBS) has successfully pursued a negligence claim against a valuer.
The case is significant as it could lead to a flood of new valuation claims.
Colliers was instructed to value a commercial property in Nuremberg, Germany by Credit Suisse in 2005. On the basis of Colliers’ valuation of €135 million, the bank advanced €110 million to the freeholder of the property. The majority of the loan was transferred to a securitised loan packager, Titan, who issued CMBS of around €1 billion, secured against a number of properties including the Nuremberg property.
In 2009 the freeholder of the Nuremberg property defaulted on the loan and the tenant became insolvent. The property was repossessed and subsequently valued at just over €12 million. It eventually sold for around €22 million.
Titan brought a claim against Colliers for negligent valuation. In its defence Colliers argued that Titan could not being a claim as it was the securitised loan note holders rather than Titan who had suffered the loss. Colliers also argued that it did not owe a duty of care to Titan as it had not been instructed by Titan to provide the valuation.
In the Commercial Court, Mr Justice Blair decided that Titan had in fact suffered a loss and was entitled to bring a claim. He also ruled that Colliers valuation was negligent, awarding damages of €32 million.
“Yet again this underlines how important it is for valuers to put in place effective procedures to ensure they can justify their valuations,” said James Burgoyne, Director – Claims & Technical, Brunel Professional Risks. “This case is significant as it sets out the circumstances in which the issuer of a securitised loan may be able to bring a claim of negligent valuation against the valuer. The insurance market will be watching carefully to see if this leads to another wave of claims against valuers.”