Rise in negligence claims by mortgage lenders

The spectre of the 1990s court onslaught from mortgage lenders - which caused ructions during the last major recession - was raised this week by figures which indicate rising numbers of professional negligence claims brought by lenders.

Insurer The St Paul - which accounts for a fifth of the solicitors' indemnity market - said that over the past six months, it recorded a rise in lender claims from 10% to 17% of conveyancing claims made.

The St Paul is understood to receive many hundreds of such claims in each six-month period.

The St Paul said the cause of residential conveyancing complaints remains consistent, stemming mostly from failure to make correct searches, delays, bad communication with parties and disorganisation.

There was a steep rise in such claims in the early 1990s after the property slump.

Trevor Moss, executive director of Alexander Forbes Professions, said insurers fear a downturn could result in a 'flurry of claims' from lenders against firms acting on their behalf or on the behalf of purchasers where they are deemed to have the lender's interests also in mind.

'They are worried that the lessons of the last collapse have not been learned and could be repeated if lenders are looking to recoup losses in relation to a market downturn and potential negative equity,' he said.

A spokeswoman for market leader Zurich Professional said: 'There is no suggestion from our figures at the moment that there is such a trend.

But if there was drop in the housing market we would expect to see a move in that direction.'

A London-based senior professional indemnity lawyer - who preferred not to be named - commented: 'I think it's unlikely because under the last recession there was a very dramatic drop in the property market and nothing as dramatic as that has happened.'

Another senior City-based professional negligence lawyer, who wished to remain unnamed, said that such stories are put about by insurers to scare people into buying more cover.

A St Paul spokesman refuted the suggestion, saying: 'This information [relates] to patterns in the sources and origins of claims.

We draw our customers' attention to it to assist them in countering them.'

Jeremy Fleming