EUROPEAN REAL ESTATE SOCIETY BERLIN - JUNE 25TH TO 27TH 1997 Contributory Negligence Involving Overseas European Banks in Property Valuation Negligence Cases In The UK

This paper examines the phenomenon of cross-border property lending and examines a number of issues regarding lending procedures and decision making processes in the context of the relationship between lender and professional advisor. It commences by placing these procedures and processes in the context of the development of cross border European property investment and finance. The UK has been a popular destination for overseas investors and lenders over the last decade and is therefore used as a case study to examine the additional institutional risk that overseas lenders may face when operating outside of their own country and obtaining advice from home professionals. The UK market was the subject of a boom period during the late 1980s, followed by a recession in the early 1990s. The losses triggered a number of professional negligence actions by lenders against valuers. These include a number of overseas lenders mainly from Europe and these cases have been examined for any particular features which, coupled with other data gained from overseas lenders as part of an interview survey, could be used to isolate any significant problems for European lenders in overseas markets.. The research identified a lack of clarity in roles and relationships between lender and advisor, difficulties in communications both internally and between overseas branches and headquarters and failures in provision and interpretation of advice. The paper concludes by identifying the issues which may need to be addressed generally by lenders and their advisors, when the lenders are operating in overseas markets. 3 1. Aim, Objectives and Methodology During the 1990s, there has been a substantial increase in the number of reported and unreported cases in the UK of lenders suing valuers for alleged negligent valuations and a number of these cases involved overseas lending institutions, including mainland European lenders. The objectives of this paper are to examine the incidence, sources and trends in European cross-border real estate investment and lending on property transactions, to compare them with the cases involving home or overseas lenders against valuers in the UK and to identify any particular or significant features which may be contributing to the occurrence of these cases. The aim of the research is to identify any issues which could be addressed between overseas lender and valuer to diminish the chances of the transaction ending in a professional liability action. Although the paper concentrates on cross border lending in Europe, the issues identified are …