The RICS said valuers must not use Guidance Note 5 in the RICS Red Book in a manner which could cause ‘the client or auditor to question the validity of the valuation, or to qualify a valuation report’.

It made the statement in an information bulletin issued today to provide further guidance to assist valuers on providing advice at a time when demand for commercial property in the UK is falling at the fastest pace in a decade.

Guidance Note 5 details the measures valuers should follow at a time of ‘valuation uncertainty’.

Bulletin's main points

The RICS International Faculty Board said in the bulletin that:

? It is recognised that the valuation process is extremely difficult when there is a greatly reduced volume of reliable sales evidence. Despite these difficulties it 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;

? 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 guidance note 5 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;

? 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.

The board believes that valuation uncertainty as defined in the guidance note 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,’ it said.

'Timely reinforcement'

David Rusholme, RICS valuation director, says: ‘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, said: ‘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.’

In July bank lenders told Property Week that development finance could dry up as guidance note 5 ‘caveats’ were increasing.