Northern Ireland

South Belfast property overvalued by up to £2m, says judge

A south Belfast mansion was overvalued by up to £2m, a High Court judge has ruled.

Mr Justice Weatherup ruled the property in Shaw's Bridge was wrongly assessed as being worth £5m in 2009.

The house should instead have been valued at between £3m and £3.75m, he said.

Aurora Leasing sued the Belfast office of estate agent Colliers, claiming it was negligent with its valuation.

London-based Aurora Leasing lent out almost £1m to businessman Paul Campbell in 2009 to help him purchase Terrace Hill House.

The five-bedroom residence set in grounds was once owned by an unnamed rock star.

After purchasing it Mr Campbell, whose previous business interests included sportswear brand Gaelic Gear, sought to borrow money to start an art dealership.

Defaulted

He agreed the loan with Aurora based on the £5m valuation from Colliers - up from an initial £4.5m estimate in 2008.

The arrangement involved a second mortgage on the mansion acting as security.

Aurora's owner told the court how he felt the deal couldn't go wrong because there was so much equity in the property.

But when Mr Campbell defaulted it turned out to be worth substantially less than the valuation obtained.

By the end of 2009 it was estimated to be worth only half as much, with its value having plunged further since.

With the primary mortgage lender having already secured an order over the £2m said to be owed to it, Aurora was left with little chance of recouping its money from any sale.

Mr Justice Weatherup reached his decision after assessing the worth of a number of comparable homes.

Delivering his judgment, he said the proper value in April 2009, just before the loan was agreed, should have been between £3m and £3.75m.

"It seems to me apparent that the valuation of the property at £5m was a significant overvaluation," he said.

Losses

He pointed out that this figure was maintained in a "falling market".

The judge held that if the £3.75m upper limit assessment had been made at the time Aurora probably would not have gone ahead with the deal because there was not enough "cushion" between the loan and the mansion's value.

Mr Justice Weatherup said: "The loss to the plaintiff in this case seems to be the amount of the loan, which is represented by the overvaluation I conclude to be to the extent of £1.25m to £2m."

The judge ruled Aurora Leasing Ltd can recover losses of more than £900,000, plus costs and interest set at 5%.

However, a 20% reduction was imposed for contributory negligence in ignoring so-called "red flags" around the transaction.

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