Next year will see a ‘significant’ rise in litigation within the real estate market, providing more work for some lawyers but putting others at risk of legal action, according to research by City firm Hogan Lovells seen by the Gazette.
A survey of 160 senior executives in the real estate sector showed that 46% expected an increase in litigation in 2011. Professional negligence is a key area where litigation is expected to rise, with landlord and tenant and insolvency cases also predicted to increase.
A third of respondents said they had seen litigation rise in 2009.
Michael Stancombe, co-chair of Hogan Lovells’ global real estate team, said the main thrust of the impending litigation would be from banks contemplating professional negligence actions against surveyors in relation to valuations. But he added that solicitors might also be pursued in relation to defective securities or defects in loan documentation, which have left banks less well protected than they should be.
‘For solicitors involved in the professional negligence field, the message is that we expect a significant flow of litigation work in that area,’ said Stancombe. He said there had been some surprise that litigation in the commercial sector had not taken off sooner, but he suggested this was in part down to the fact that banks had not yet acted to crystalise their losses by selling the relevant assets.
Stancombe said he attributed the expected rise in landlord and tenant and insolvency cases to the impact of the recession.
‘Where rents are weakening due to the economic situation, tenants will be keen to exercise break rights in contracts, while landlords will be keen to prevent that,’ he said.
He added that the trend of increased litigation could be prolonged: ‘History has shown that the aftermath of these significant recessionary periods, and this has been a brutal one, often runs for four or five years.’