CMBS Issuer wins negligence claim against valuer in English High Court

by Dechert LLP

In a judgement of major significance for the commercial mortgage backed securities (CMBS) market, the High Court has ordered a negligent valuer to pay €32 million damages to a CMBS issuer. This is the first time a CMBS-related valuation negligence claim has been before the English courts.


In 2005, Credit Suisse made a loan in reliance on Colliers International (UK) plc’s (Colliers) €135 million valuation of a commercial property in Germany. The senior tranche was then largely securitised and transferred to Titan Europe 2006 plc (Titan) as part of a €1 billion securitisation.

The tenant of the property subsequently became insolvent and vacated, and the property’s value plummeted.

Titan claimed that Colliers had been negligent when it prepared the valuation and as a result the property had been overvalued and Titan had suffered a loss when it acquired the senior tranche.


1. The true value of the property at the time of the valuation was €103 million

After a careful review of the expert evidence on both sides the judge determined that the appropriate valuation was €103 million and then allowed a 15% margin for error (Colliers had contended that an appropriate margin should have been 20%). He found that Colliers’s valuation was outside this margin for error, in large part because it had failed to give sufficient weight to the fact that the property was likely to attract poor demand because it was very large, old and built to the needs of the current tenant’s particular business, and held that Colliers had therefore been negligent. He awarded Titan €32 million, being the difference between Titan’s €135 million valuation and the judge’s finding that €103 million was an appropriate valuation.

2. The issuer suffered loss

Colliers argued that as a non-recourse issuer of notes, Titan had suffered no loss and was the wrong claimant. Economically, it was not disputed that it was the noteholders who had suffered loss as a result of the drastic reduction in value of the underlying property. However, the judge held that the non-recourse nature of the notes was irrelevant: Titan suffered a loss the moment it purchased the senior tranche because it paid more than the senior tranche was worth. It was held that it was essential to Titan’s ability to bring a claim that it could show that it was contractually obliged to distribute any sums received following judgement to the noteholders under the waterfall in the Cash Management Agreement. The judge was at pains to emphasise that the decision was based on the facts of this particular case.


Operators in the CMBS market have been waiting for a judgement on this issue for a long time. It has always been a point of some interest that there have been no actions against valuers in the courts (successful or otherwise) in the aftermath of the intense lending activity and subsequent loan/real estate crash from 2008 onwards.

It is understood that Colliers intend to seek leave to appeal to the Court of Appeal. Given how much is at stake for valuers and insurers, this is perhaps not surprising. The grounds of appeal are likely to focus on the decision in relation to whether the issuer was the correct claimant and had in fact suffered loss.

In any event, given the potentially significant ramifications of this judgement, the industry (and the legal community) would benefit from the analysis of the Court of Appeal.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dechert LLP | Attorney Advertising

Written by:

Dechert LLP

Dechert LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.