Bank of Ireland suing Savills in Britain over valuation of project

BANK OF IRELAND is suing property advisers Savills in Britain for £1.3 million for overvaluing a residential development for which the Irish lender provided a loan.

In 2006, Bank of Ireland advanced funding to developer MDL (Stoke) for the construction of 96 apartments in Stoke-on-Trent in the English midlands, using Savills’s valuation of the project.

MDL subsequently became insolvent and was placed in administration – a form of corporate rescue – owing the Irish bank £4.8 million.

Bank of Ireland is now suing Savills, which it claims wrongly advised it in May 2006 that the site was worth £2 million.

The bank subsequently obtained a valuation from multinational property consultants King Sturge showing that the property was worth £950,000 when it backed the project.

The site was eventually sold for £2.8 million and the bank recovered £2.3 million, but it claims to have lost £4.5 million on the development overall.

It claims that Savills overstated the gross value of the site, overestimated the construction costs and failed to recognise that the development would not attract “city living” buyers.

It also argues that Savills failed to tell the bank about the socially deprived nature of the area in which the development was taking place, and should have provided a valuer with local knowledge.

The bank did not comment on the proceedings yesterday.