Property over-valuation fraud now leads to expensive future

Recently, professional indemnity insurance claims for residential property over-valuation, oftentimes perpetrated fraudulently by surveyors, had become commonplace.  Despite this, the majority of the industry had no knowledge of the number of these claims since many of them were settled before going to trial.

While Britain’s economy may slowly be emerging from its darkest hours, the results of the recession will doubtless be felt for quite some time; in particular a great number of professional liability insurance providers share the belief that the residential market fraud crisis, now over, will shift into the commercial sector.

Many industry experts feel that many UK lending institutions, in an effort to preserve their already wounded reputations, have not quantified the entirety of their losses in the commercial property market.  However if the property sector begins showing economic growth again, those losses may either become minimised or disappear altogether.  Loan sums are only revealed if a property goes to market, after all, so any potential losses can be concealed for a short amount of time.

While the economy has been making noises as though it might recover, economists have been expressing fear at the prospect of Britain double-dipping back down into recession.  The disposal of so-called “toxic” holdings may soon begin, thanks to commercial property prices beginning to rise in select regions.  This would lead to a mitigation of loss compared to attempting to sell a commercial property last year, for instance.

While the new Basel III regulations will require banking institutions to hold more assets in reserve, this may lead to an incentivising of the disposal of properties.  However, such disposals run the risk of uncovering just how serious those losses might be, and many economic commentators have anticipated business liability insurance claims against surveyors increasing as lenders seek ways to minimise their losses.

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