LSL Property Services has been forced to set aside £17.3m to cover legal claims against its valuation services between 2004 and 2008, resulting in a pre-tax loss of £7.9m for the first half of the year.
In its interim results, published today, the property services group says the decision to set the money aside has been been driven by lenders filing claims which LSL believed to be “dormant”.
The increased provision has resulted in LSL’s profits falling from £6.5m in the first six months of last year to a loss of £7.9m for the first half of this year.
LSL non-executive chairman Roger Matthews says: “During the period we have substantially increased our PI provision following a recent deterioration in our claims experience for the high risk period of 2004 to 2008.
“This is a disappointing development and reflects a deterioration in claims experience resulting from certain lenders using solicitors on a ‘no win no fee’ basis and pursuing claims we previously considered dormant.”
LSL expects the provision to impact the business over the next three years, although it says this will be partly offset by the disposal of freehold properties currently held on its balance sheet, which it expects to raise around £9m after tax over the next two years.
LSL says it is continuing “to build a provision for estimated PI costs relating to valuations completed since 2009”.
The statement shows group revenue increased from £103.4m in the first six months of last year to £120.8m in the first six months of this year.
It does not give profit figures for the group’s intermediary brands but revenue across its estate agency and intermediary networks grew 17 per cent from £12.3m in H1 2011 to £14.4m in H1 2012. The group arranged mortgage lending of £3.6bn in the first half of the year, up from £3.2bn in the same period a year earlier.
London & Country associate director of communications David Hollingworth says: “This goes to show this issue has not gone away and lenders will continue to pursue claims against valuations, So I think we will see more of this type of thing happening.”