SURVEYORS are avoiding working with peer-to-peer property lenders due to fears of multiple negligence claims.
Peer2Peer Finance News understands that professional indemnity (PI) insurers are reticent to issue policies for surveyors working with P2P property lenders, due to concerns that an issue with one loan could trigger several claims from individual investors.
The challenge in obtaining PI insurance is dissuading some surveying firms from working with the P2P sector.
An email sent to P2P property lender LandlordInvest from Colliers Valuation and Advisory Services, seen by Peer2Peer Finance News, revealed that the surveying firm will not work with P2P lenders.
The email said that LandlordInvest’s request for a valuation had been passed to its internal risk team for review but that Colliers’ policy was that it was unable to act for P2P lenders.
“We have never had such a response from any valuer, or any other company in any other industry,” said Filip Karadaghi, chief executive of LandordInvest.
“It is quite surprising.
“It is quite significant as there has been a lot of criticism regarding valuations on other P2P platforms and it is surprising to see that one of the leading valuers has shut the door to platforms. This is preventing platforms and lenders from benefitting from professional services provided by an established company.”
Michael Lynn, chief executive of P2P property lender Relendex, said he has come across similar issues.
“We use a wide range of valuers,” he said.
“If they don’t want to act [for us] we use another firm. But it really depends on their insurers.
“Insurers seem to be concerned that in the event of a PI claim, the insurer might be faced with multiple small claims from individual lenders.
“That would not happen in Relendex’s case because we act as an agent for the whole lender group and would bring any PI claim on behalf of all lenders participating in a particular loan.
“Our own advisers have suggested a minor change to our terms and conditions which should satisfy insurers.”
Insurance brokers have confirmed that it is the risk of multiple claims that is putting off PI providers and surveyors.
“There are many risks to consider with regards to the surveying of P2P properties but on the subject of multiple claims there is the risk of a ‘per claimant’ deductible or excess which means the surveying firm would be liable for a fixed amount, sometimes in the thousands for each individual claim,” Brendan Murphy of Peacock Insurance Services, said.
“As an example, 100 individuals investing in a P2P property who start a class action could be catastrophic for a surveying practice.”
Colliers Valuation and Advisory Services did not respond to requests for comment.
This article featured in the May edition of Peer2Peer Finance News, now available to read online.