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Property Valuations - The RICS 'Red Book'

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In this short briefing note we'll outline how valuers go about their work when valuing properties. This article is provided for guidance purposes only and should be verified by reference to the actual documents. Briefing Doc: RICS Valuation - Global Standards: UK National Supplement (October 2023)


This briefing doc reviews the main themes and key points from the "Red Book UK National Supplement" and the corresponding PDF document, "rics-valuation-global-standards-uk-national-supplement-oct23-reissued.pdf."


Main Themes:


  • Compliance & Regulation: The primary focus of the document is ensuring RICS members adhere to UK laws and regulations when providing valuation services. This includes navigating the complexities of devolved administrations and other authoritative requirements.


  • Valuation Standards & Guidance: The supplement outlines specific standards and guidance for various valuation purposes within the UK jurisdiction, supplementing the global RICS Valuation – Global Standards (“Red Book”). This includes detailed instructions for regulated purpose valuations and handling potential conflicts of interest.


  • Specific Valuation Applications: Detailed guidance is provided for valuing a range of assets within specific UK contexts, such as:

  • Financial reporting for different sectors (local authority, central government, NHS, charities, social housing)

  • Regulated purposes like listings, prospectuses, takeovers, and collective investment schemes

  • Secured lending for both commercial and residential properties

  • Taxation purposes (CGT, IHT, SDLT, ATED)

  • Compulsory purchase and statutory compensation

  • Local authority land disposal below market value


Key Points & Facts:


  • Mandatory Requirements: The document clearly distinguishes mandatory requirements (highlighted in bold) from advisory guidance.


  • Regulated Purposes: The supplement specifies "regulated purposes" for valuations, triggering specific disclosure requirements and stricter adherence to standards. Examples include:


  • "valuations for financial reporting under UK VPGA 1, excluding public sector and only in respect of assets owned or part owned by entities whose transferable securities are admitted to trading on a regulated market or large companies "other regulated purposes under UK VPGA 2"


  • Rotation Policy: UK VPS 3 mandates a rotation policy for valuers to mitigate conflicts of interest. This includes limitations on the duration a single firm or valuer can be responsible for valuing the same asset for the same purpose.

  • "A valuation firm must not agree to a single engagement of more than five years to value the same asset, for the same regulated purpose."


  • Conflicts of Interest: The supplement addresses potential conflicts of interest, particularly in situations where the valuer might have been involved in the property acquisition. UK VPS 3.1 states:

  • "These RICS professional standards deal with, among other things, the conflict that may arise where the valuer or firm could be involved in the introduction and acquisition of property by the client and in the provision of a regulated purpose valuation of the same property."


  • Basis of Value: Specific bases of value are outlined for different purposes, including:


  • Market Value: Frequently used, but subject to specific statutory definitions in certain contexts like tax valuations.

  • Depreciated Replacement Cost (DRC): Employed for specialised properties where market value is difficult to ascertain.

  • Existing Use Value (EUV): Relevant for specific public sector valuations, assuming continued use for the current purpose.


  • Special Assumptions: The supplement highlights instances where special assumptions might be necessary, such as valuing properties subject to defined marketing periods or assuming completion of a development in progress.

  • "In the UK, particularly for secured lending purposes, valuers may receive requests to provide a market value subject to a defined marketing period. This request could occur in the event a property is about to be, or has been, repossessed."


  • Supporting Guidance: The supplement frequently references other RICS guidance documents for more in-depth information on specific topics like reinstatement cost assessments, valuation of buy-to-let properties, and expert witness services.


Overall, the "Red Book UK National Supplement" provides critical information for RICS members undertaking valuation services in the UK. Understanding and adhering to these standards and guidelines is essential for maintaining professional competence, ethical conduct, and client confidence.

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