Valuation

Dear [Richard Spence],

Thank you for your detailed enquiry.

Based on the information provided, the valuation in question appears to fall under the definition of a Regulated Purpose Valuation, as set out in the RICS Valuation – Global Standards (Red Book), specifically VPS 1 and PS 3.

The key determining factors include:

• The valuation is prepared for financial reporting purposes;

• The entity is a non-departmental public body (NDPB), and its financial information will be consolidated into the Whole of Government Accounts (WGA);

• The valuation figures are being reviewed for audit purposes;

• The applicable framework includes IAS 16, adapted by FReM, indicating alignment with public sector accounting standards.

Although the entity is a charity reporting under the Charity SORP, its integration into WGA and public sector oversight suggests that it functions as a quasi-public sector body. Consequently, the valuation meets the RICS criteria for a Regulated Purpose Valuation.

As such, the valuation should be subject to the Mandatory Valuation Rotation (MVR) policy as per RICS Professional Standard PS 3, which requires regulated firms to have a documented policy on valuer rotation to maintain objectivity and reduce familiarity risk over time.

Hi Khaled- thank you for my response to my query. Useful to get your perspective. Can I check whether you are an official RICS representative employed by the RICS or is your response based on your understanding of the RICS regulations (i.e. UK Red Book)? Many thanks Richard

Hi Richard,

Thank you for your message and kind words.

To clarify, I am not an official RICS representative nor employed by the RICS. My response is based on my professional understanding and interpretation of the RICS regulations, including the UK Red Book.

I am a certified real estate appraiser in Egypt and have also been a Senior Professional Assessment (SPA) candidate with RICS on the Commercial Real Estate pathway for the past three years. My insights are drawn from both my practical experience and ongoing professional development aligned with RICS standards.

If you require an official position or guidance from RICS, I would recommend reaching out directly to their regulatory or standards team.

Best regards,
Khaled

Thank for your enquiry, which is a nuanced one. RICS is currently considering a number of such enquiries which have come about following the recent report into UK public sector financial reporting valuation governance (https://www.rics.org/news-insights/rics-decides-on-rules-for-public-sector-valuer-rotation-in-new-report). 

Further to the consideration of relevant expert groups and governance, we will look to further update the Red Book UK National supplement FAQs (https://www.rics.org/profession-standards/rics-standards-and-guidance/sector-standards/valuation-standards/red-book/red-book-uk). Your patience is appreciated in the interim. I'll update this response further when I'm able to.

RICS welcomes discussion and debate around important subjects for members and stakeholders and we draw insight from this forum in order to inform the development of standards and other content. However, please be aware that discussion within this forum does not constitute RICS policy or guidance.     

Hello Richard

As Charles Golding has indicated, RICS has recently confirmed the exemption of public sector entities from the RPV requirements in UK VPS3.  I would hope that common sense would apply in your case and your client be regarded as a public sector entity.  I presume the valuations are of owner occupied property given the reference to IAS16.  RICS has also recently consulted on the wider operation of the new requirements in UK VPS 3 introduced in May 2024, although the results are yet to be made public.

The strict requirements for rotation and ascertaining whether the valuer’s appointment had been approved by a non-exec director or similar were in response to recommendations in the 2021 Pereira Gray report.  However, Pereira Gray's brief  was only with the valuation of Investment Property ,and in particular the regular recurring revaluations of such property required under UK investment regulations.

Unfortunately, the fact that valuations may be commissioned for other asset types for use in financial reporting and very often are not published in the actual published statements was overlooked.  I have been arguing that an amendment should be made to the standard to limits its application only to the problem that Pereira Gray was addressing in his report.  You might find my blog article of interest. https://www.valuology.org/single-post/are-you-in-a-spin-over-rotation

Hi Chris

Thank you for commenting on my query and your observations - useful to get your perspective. Hopefully, the RICS' recent consultation on Regulated Purpose Valuations and Valuation Rotation results in clarifying some potential areas of uncertainty and where appropriate reviews scope/reach of the regulations. I regularly read your observations in Valuology - your review of the proposed Global Red Book updates during the consultation stages were particularly insightful. I'm aware our colleagues in RICS Professional Practice are looking into my particular query but this forum is certainly useful to share thoughts on the matter.

Regards Richard

Thank you so much for everyone's input on this question, looks like we've had some really valuable insights shared. @Richard Spence for future reference the majority of myRICS community users should be displaying a ribbon near their profile picture. Any RICS colleagues will be identified as "RICS Staff" so as long as you see that identifier you can be confident that a reply has come from on of our team.