Cluttons is being sued for more than £3m over a boom-time valuation on a block of flats in East Sussex.
Papers recently acknowledged by the high court show that Channel Islands-based Economic Lifestyle Property Company is claiming that the agent provided a negligent valuation on St James’ Heights, a Bexhill-on-Sea residential development site.
It is suing for loss and damage.
Cluttons is vigorously defending the claim.
According to the writ, Economic Lifestyle and its trading subsidiary Elpic Properties entered into an agreement to buy St James’ Heights from St James’ Estates and its construction division Allum, based on Cluttons’ £9.8m valuation.
It alleges that in early June 2006 Cluttons valued the 51-flat block at £9.8m, with an additional freehold reversion of £210,000, giving a gross freehold value of just over £10m.
The investor claims that, based on that valuation, it agreed to pay St James’ Estates £3.1m for the land and Allum £5.4m to build the development – a total of £8.5m.
However, it goes on to allege that despite the fact that the property market was rising during 2006, it received a valuation report from Allsop in October valuing the leasehold interest at £7.7m and then another from DTZ in February 2007, giving it a value of just £7.1m.
Economic Lifestyle claims that Cluttons breached its duties to act with reasonable skill and care in preparing its report, failed to consider appropriate comparables, failed accurately to take into account the location of the property, and failed to consider appropriately the individual characteristics of flats in each block, or the types of purchaser who would be attracted to the development.
It says that the market value as at June 2006 should only have been £6.8m and that Cluttons’ report overvalued St James’ Heights by 44%.
Economic Lifestyle has now sold all 51 flats in the block, but claims it has suffered a final loss of £3.6m.
It is seeking to recover that figure plus interest.
