Institution warns on disclaimers and promises further guidance in weeks
The RICS has issued further guidance to valuers in uncertain times to avoid auditors and clients ‘questioning the validity of valuations, or qualifying a valuation report’.
It published the three-page bulletin this week, ahead of a 25-page publication at the end of the year. It provides advice that the RICS said would help allay concerns that ‘some valuations currently have a greater reliance on professional judgment than factual evidence’.
The bulletin, ‘Valuation Uncertainty and Market Instability’, provides detailed notes for using guidance note 5 in the RICS Red Book, as well as valuation for the purposes of financial reporting.
The bulletin states:
- It is ‘not appropriate’ for valuation reports to feature standard caveats or qualifications that ‘diminish or question the authority of the advice given’. General disclaimers are also unacceptable.
- A valuer must determine whether market instability exists for each local market and for each asset type.
- A valuer must give a single valuation figure and not a range of values, ‘although a comment on the degree of subjectivity is encouraged’.
- Valuers should engage into a dialogue with clients regarding any special assumptions or alternative valuation bases that may better express the particular circumstances.
- Valuers must provide ‘authoritative and considered professional advice’ and it is ‘entirely appropriate’ to provide forward-looking advice outside the formal valuation statement.
Committee chairman Andrew Renshaw, Jones Lang LaSalle’s head of valuation advisory, said the imminent paper will provide further information guiding valuers on how to provide commentary on ‘likely quantitative movements in future’.
Renshaw said the guidance is needed at a time when demand for UK commercial property is falling at the fastest pace in a decade and there is little transactional evidence.
William Newsom, Savills’ valuation head, said it was a practical and pragmatic bulletin.
David Rusholme, RICS valuation director, said it was a ‘timely reinforcement’ for valuers and clients.
A cross-industry party made up of the RICS, the Association of Real Estate Funds, bankers, auditors, valuers and property fund managers produced the bulletin.