RICS guidance maintains valuation standards in uncertain times
RICS provides guidance for valuers facing increased difficulty in undertaking valuations in a highly volatile market when demand for commercial property is falling at the fastest pace in a decade. Guidance Note 5 (GN 5) of the RICS Red Book ensures Chartered Valuation Surveyors can continue to deliver high levels of professional service to clients at a time of severe reduction in comparable transactions.
In support of their commitment in advancing standards, RICS International Valuation Faculty Board is issuing an information bulletin to provide clarity to assist valuers on the issues surrounding providing valuation advice in uncertain market conditions.
The RICS Valuation Faculty Board believes that Valuation Uncertainty (as defined in GN 5) has existed in the market for some time in many world regions, and has recently become more marked. To promote the highest level of transparency in valuations the information paper issued today, gives valuers clearer guidelines on best practice for operating in this market. In particular RICS is keen to highlight the following points to ensure standards are being maintained:
- In each local market and for each property asset type the valuer must decide whether an element of market instability (an example of Valuation Uncertainty) exists.
- It is emphasised that advice in GN5 has always centred around the provision in most circumstances of a single valuation figure with a focus on providing authoritative accompanying narrative in the valuation report.
- It is recognised that the valuation process is extremely difficult when there is a greatly reduced volume of reliable sales evidence. Despite these difficulties is not appropriate for reports to feature caveats or qualifications which would cause the client or auditor to question the validity of the valuation, or to qualify a valuation report.
- Valuers are encouraged to engage into a dialogue with clients who need additional advice and valuations on alternative bases, which aid understanding of the client’s requirements.
David Rusholme, RICS Valuation Director states: “It must be said that Valuers are meeting the challenges of this unprecedented market full on. This bulletin is a timely reinforcement to steer both valuers and their clients through the current market. The advice in the Red Book and GN5 is robust and stands up well to the current situation. Reinforcement of what is expected is helpful to all concerned with the valuation process. The RICS is not calling a period of uncertainty, with an official start and end date. It is still very much the case that the valuer needs to look at individual property in the context of the market and assess conditions.”
Mark Gerold, Chair of the RICS International Valuation Faculty Board adds that:
‘In conditions of uncertainty, such as exist at present, it is absolutely correct for valuers to refer to GN5 in their report – it is for these situations that the guidelines were originally introduced. “
RICS (Royal Institution of Chartered Surveyors) is the mark of property professionalism worldwide. It covers all aspects of property, construction and associated environmental issues. RICS has 86,000 chartered members (FRICS and MRICS) and 55,000 members in other categories of membership (TechRICS, trainees and students) globally. It represents, regulates and promotes the work of these property professionals throughout 146 countries. RICS is governed by a Royal Charter approved by Parliament which requires it to act in the public interest. It is also a professional regulatory body approved by Government (HM Treasury).