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Introduction
A recent internal review of Valuer Registration has highlighted that there are genuine doubts among
some members about the extent to which all or part of their work falls within the scope of the Red
Book, more particularly whether it is, or is not, within one of the exceptions specified in PS 1 section
6 paragraph 6.2.
Although not formally part of the Red Book, the material below is intended to assist members by
addressing some of the practical issues that arise in their day-to-day work, providing more detailed
explanation and comment, which it is hoped will cover most situations. The material is in three parts:
Part 1 addresses issues about the overall scope or reach of the Red Book
Part 2 covers the principles underlying the Red Book exceptions in more detail
Part 3 considers some practical examples drawn from real world situations.
Parts 1 and 2 are of global application. Part 3 initially contains mainly UK examples, but will be
progressively developed to include examples from all World Regions.
Following issue of this clarification material, it is anticipated that members and firms will wish to
undertake any internal checks or reviews they judge necessary to ensure they are fully compliant
with the Red Book and also with the requirements of Valuer Registration where it applies in the
jurisdiction within which they practise.
Q. How do I determine how much of the Red Book applies to the work I undertake?
A. Paragraphs 13 and 14 of the Red Book Introduction provide the starting point thus:
VPS 14 are mandatory in all cases unless otherwise stated (Introduction para 13).
VPGA 19 are not mandatory but offer further implementation guidance in specific instances
and also embody best practice procedures that in the opinion of RICS meet a high
standard of professional competence in relation to the issues covered (Introduction para 14).
There is an expectation, albeit not a requirement, that members will follow them. And indeed
it is in members best interest to do so, as they could be disadvantaged in the face of
challenge, including litigation, if they have not had regard to the VPGAs.
VPS 14 are about the process of valuation, ensuring amongst other things the delivery of an
IVS-compliant valuation, whereas VPGA 19 are about specific assignments or circumstances.
It will normally be very straightforward to decide whether any and, if so, which VPGA applies to
the specific task in question, but it may be rather less straightforward to identify those cases in
which application of VPS 14, although advisory, is not mandatory. These instances fall either
into the category of exceptions (PS 1 section 6) or of departures (PS 1 section 7). In brief:
When and where a departure properly falls to be made is usually specific to an individual
case and is always to be determined on the particular facts and circumstances (PS 1
paragraphs 7.27.5).
In contrast, exceptions are not specific to individual cases but cover particular categories or
aspects of valuation activity (see PS 1 paragraph 6.2) in view of the importance of
understanding when and where such exceptions arise, and how they should be dealt with,
further detail is given in the separate Q and A section below.
Q. Doesnt compliance with the Red Book in relation to small tasks simply increase
costs and render the valuer or firm concerned uncompetitive?
A. The objective of the Red Book, and indeed of valuation standards generally, is to promote
consistency, accuracy, transparency and confidence but it does not follow that the process of
valuation itself cannot reflect the needs and circumstances of the individual assignment. In
particular the need for proportionality in reporting is recognised (Red Book Introduction paragraph
8b).
Q. Can informal rather than formal advice be given and, if so, does it lie outside of
the Red Book?
A. The Red Book does not recognise a distinction between informal and formal valuation advice.
Neither are defined in the RICS glossary, and indeed the Red Book actively discourages the use of
these terms (see PS 2 paragraph 1.4) as they may give rise to misunderstandings, particularly but
not exclusively regarding assumptions that a member may or may not have made.
More generally, whether and to what extent the Red Book applies in individual cases must always
be determined on the basis of the facts and circumstances. Generally it is safer to assume that it
does apply.
Q. What about oral valuation advice is that subject to the Red Book?
A. While the Red Book does not formally extend to the provision of oral valuation advice, valuers
are advised to exercise great care, not least to ensure clients fully understand the nature of the
advice being given and the terms under which it is provided. The mere fact that advice is provided
orally does not mean that it is therefore provided without liability the valuers responsibilities and
obligations will always depend on the facts and circumstances of the individual case.
In some countries, the provision of oral valuation advice is in any event subject to specific
jurisdictional standards or requirements. Furthermore, in all jurisdictions valuers acting as expert
witnesses should be alert to the fact that both oral and written advice will be subject to the same
criteria see the RICS practice statement Surveyors acting as expert witnesses (4th edition, 2014),
which must always be followed.
Since the context in which the surveyor may be providing a valuation opinion as an expert will vary
widely, and since the rules and procedures of the judicial body and also any legislative requirements
concerning the basis of value and related assumptions, etc. must always be strictly observed and
followed, it is not appropriate for the content of VPS 14 to be made mandatory in such cases.
However, VPS 14 may still provide a useful guidance in terms checklist of matters that need to be
covered.
Members should always refer to the RICS practice statement Surveyors acting as expert witnesses
(4th edition, 2014). Note that oral advice as an expert witness is subject to the same requirements
and standards as written advice.
the mere fact that the provider of the valuation is an internal valuer does not bring the
valuation assignment within the exception the focus here is on the internal only purpose
of the valuation and not the process or means of its delivery
it is possible for an external valuer to provide an internal purposes valuation, though where
that is so, the need for the terms of engagement and written advice to be absolutely clear
about non-disclosure to third parties, and about the exclusion of liability, becomes even more
crucial.
there is a formal dispute in existence, however it arises, and the proceedings will therefore
be subject to any relevant legislation, regulation, rules or court directions that may be in
place or issued, which will always take precedence over the Red Book
advice given to a client may extend to various matters going beyond the provision of advice
on value, for example advice on tactics and/or the probable outcome of litigation and/or
options regarding settlement options or mitigation of costs.
The precise circumstances in which a surveyor (not necessarily solely a valuer) may be
asked to advise a client on the purchase of a property will vary widely. It may be a passive
assignment, in which the surveyor simply proffers professional advice, or an active
assignment, in which the surveyor both proffers initial advice and also acts for the client in
the purchase itself. If a purchase report containing a valuation (e.g. an opinion of the current
market value) is provided to the client, then VPS 14 apply the fact that a valuer may be
asked (or there is a high degree of probability that he or she will be asked), at the time or
subsequently, to negotiate the acquisition of the property does not take it into the exception
under PS 1 paragraph 6.2 bullet point 2. The key point here is that a firm view on the
property's market value (or other defined base of value) is being provided in writing. It is
different in character from advice on tactics or possible outcome, e.g. This is what I think
you will be able to buy the property for.
Making an internal presentation to a client advising on property value for future tax
liabilities on a what if scenario
The key point here is to be explicit about the terms of engagement, and to ensure they are
properly set out and agreed, before any advice is given. If the advice is to be provided
confidentially, without liability, and without disclosure to any third party then it may properly
fall within the exception at PS 1 paragraph 6.2 bullet point 3. This can be so even if it is
provided in writing and even if it is provided by an external valuer.
A HomeBuyer Report contains a written opinion of market value to which VPS 14 will apply,
whether or not the figure is used for the purpose of negotiation subsequently.
A valuation provided for probate (or more correctly, inheritance tax) purposes is a written
opinion of value as at the date of death in accordance with the relevant statutory definition, to
which VPS 14 will apply. In the UK specific reference should also be made to the guidance
in UKGN 3.
Providing an opinion of value to a client for whom regular valuations are undertaken in
relation to the prospective value of an individual asset, or group of assets, after an asset
management initiative that is in contemplation a what if scenario would fall within the
relevant exception provided the advice is for internal purposes only (as it clearly usually
would be), is not to be communicated to any third party, and is without liability.
Providing an opinion of value to a client for whom regular valuations are undertaken in
advance of the acquisition of a new property would fall within the relevant exception
provided the advice is for internal purposes only (as it is likely to be), is not to be
communicated to any third party, and is without liability.
Compulsory purchase work is a complex area of activity for which it is essential that a valuer
acting either for an acquiring authority or for a claimant is suitably qualified and skilled. Such
work does not automatically come under one of the Red Book exceptions, though there may
be aspects which do, such as appearing as an expert witness. In particular, it is not
automatically covered by the negotiations/litigation exception, since in most, if not all,
instances it is necessary for the assets being acquired to be individually valued as part of the
overall claim for compensation and for that claim to be formally submitted or for an offer of
compensation to be formally made before detailed discussions and negotiations
commence or are concluded. Naturally the code of compensation applicable in the individual
case takes precedence over the matters set out in VPS 14 and any other specific
requirements of the Red Book. Such codes must always be strictly followed doing so does
not involve a departure from the Red Book.
VPS 14 apply to valuations in accordance with the Charities Acts. Such valuations do not
fall within the statutory function exception.
VPS 14 apply to valuations provided in relation to the Landlord and Tenant Acts, including
for lease extension or renewal. Such valuations do not fall within the statutory function
exception, save for certain determination functions that expressly fall to be performed by a
valuation officer.
VPS 14 apply to valuations for leasehold reform cases. Such valuations do not fall within
the statutory function exception.
VPS 14 apply to valuations for the purposes of national taxation and do not fall within the
statutory function exception. Valuers practising in the UK will wish to have regard to UKGN 3
Valuations for capital gains tax, inheritance tax and stamp duty land tax, where applicable.
Valuations for the purposes of right to buy cases are subject to VPS 14 and do not fall
within the statutory function exception. However, the exception does apply to, for example, a
District Valuer in England and Wales undertaking a determination, which is a statutory
function of a quasi-judicial nature.
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