Knight Frank sued over Aberdeen student accommodation valuation

Specialist lender Paragon is suing Knight Frank over what it claims is a faulty valuation report it produced for a proposed student accommodation development in Aberdeen. Knight Frank provided the report in 2016 for a lender called Titlestone Structured Finance. Titlestone was acquired by Paragon in 2019. According to court papers, in late 2015 Titlestone was considering lending £10m to a special purpose vehicle that planned to redevelop land at 140 Causwayend in Aberdeen into high-spec student flats and studios. It decided that it would only provide the loan if the minimum valuation of the property after purchaser’s costs on completion was £16.2m, so commissioned Knight Frank to produce a report. Court papers show that Knight Frank delivered its report in February 2016, valuing the property on completion at £16.8m. The report also had a number of other valuations based on different circumstances. Titlestone agreed to provide the loan in April 2016. It was fully drawn down before the end of the year. The SPV later defaulted on its repayments leaving Titlestone, and later Paragon, with a loss against the property, which it has been unable to sell. The 173-bed development, known as Fraser Studios, has since been completed and is operational. However, Paragon, as successor to Titlestone, is now suing Knight Frank arguing that there were various mistakes and omissions in the report and that, had Titlestone been properly advised, it would not have made the loan. While the total amount claimed by Paragon is unclear, it may be as much as £11m. Knight Frank’s liability for damages may be capped at around £5m, however, according to the claim. Knight Frank denies negligence. “There are no fewer than 20 individual allegations of breach, which in the main are repetitive and contain bare assertions with no rationalisation of explanation,” said Knight Frank’s lawyers in its defence. “The claimant has chosen to ignore very many parts of the defendant’s report that are of the highest significance to the allegations that the claimant now makes.” The filing adds: “Causation is denied. Even had the defendant acted negligent, which it did not, Titlestone would still have made the same loan to the borrower on the same terms, in any event.” The filing, made at the High Court, also denies loss and damage. It says: “Titlestone suffered no recoverable loss and damage that falls with the scope of the defendant’s obligation and duty to it… Titlestone was guilty of imprudent lending.” The case, if not settled, is likely to go to trial in late 2025 or early 2026. Photo © Maureen McLean/Shutterstock