A flood of claims from banks concerning homes allegedly overvalued before the downturn in 2008 have left a £25m hole in profits for LSL Property Services, owners of Londons Marsh & Parsons chain and the national agency Your Move.
The issue also appears to have prompted the departure of LSL finance director Steve Cooke with immediate effect.
LSL had made a £12m provision for claims from lenders over repossessed homes that ended up being worth much less than LSL's original valuations between 2004 and 2008.
But a review of LSL's liabilities led it to add up to £25 million to the bill because of the higher than expected number of claims.
Its statement says:
LSL's Annual Report & Accounts 2013 .... included an additional professional indemnity (PI) provision of £12.0m (£9.2m after tax) due to the deterioration in claims experience relating to the 2004 to 2008 high risk lending period. High levels of claims relating to this period have continued to be an industry wide problem.The additional provision included an increase in the Incurred But Not Reported' (IBNR) provision required for notifications and claims estimated to be received in the future for the 2004 to 2008 period. The primary statutory limitation for this period has now ended. It was noted in the AR&A 2013 that this was the Board's best estimate of future claims but that the process of resolving open claims and estimating future claims was on-going. It was also noted that the conclusions on the appropriate level of IBNR provision were sensitive to small changes in assumptions and were therefore highly subjective.
As part of the 2014 year end process, LSL is undertaking a detailed review on a case by case basis of all notifications and claims relating to the 2004 to 2008 period and a number of material issues have been identified. This review has included an assessment of the notifications and claims by specialist PI lawyers. The review identified that a greater proportion of existing notifications are deteriorating into claims, and the average cost per claim is greater than anticipated due to higher legal costs and a number of larger notifications/claims.
Rival agency group Countrywide is also believed to be suffering continuing costs relating to claims against surveys conducted between 2004 and 2008.
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Comments
So stupid. What other industry can the market go back and sue for being stupid. It was the buyers fault. All the surveyors did was agree with a greedy buyer. I bought shares once after company said they found oil. 2 hours later they said it was a mistake...true story, Desire in falklands.... then lied and that was it....can i sue the intermediary who took my trade