The Royal Institution of Chartered Surveyors (RICS) has published an updated UK supplement of its ‘Red Book’ – its master document for regulating the valuation profession globally. The new UK supplement update addresses recommendations found in the Independent Review of Real Estate Investment Valuations, published in January 2022.
One of the biggest changes is the implementation of time-limited, mandatory rotation cycles for regulated purpose valuations, alongside measures to ensure an orderly and consistent transition to the policy, standardise its governance, and prevent conflicts of interest in the commissioning and receiving of valuation reports.
The new rules will prevent valuation firms from valuing an asset for regulated purposes for more than ten consecutive years, requiring a change or “rotation” to a different valuation firm. These critical changes will improve transparency, ultimately serving the public interest.
RICS’ Valuation Review Implementation Committee (VRIC) and its Knowledge and Practice Committee (KPC) developed the changes after two in-depth rounds of consultations with those commissioning, undertaking, auditing, and regulating valuations. The amended standards have been approved by the Standards and Regulation Board (SRB).
Due to this wide-ranging update, which will cause business models to change for RICS regulated valuers in the UK, RICS has set a transition period for the implementation of the rotation requirements so that clients and firms have a reasonable timeframe to rotate their business relationships. The new regulations will come into effect on 1 May 2024, and RICS will give a series of briefings to help the industry understand its requirements over the coming months. These measures include an online webinar* that will be conducted on November 6, 2023.
Following industry feedback, RICS recognises that a tailored approach is necessary for governance and rotation concerning valuations undertaken for public sector-related investment properties. This is because a legislative and regulatory framework exists for the public sector, and some valuation is undertaken internally. RICS will commission a workstream to monitor their implementation and work closely with key public sector stakeholders to place practicality and the public interest at the heart of its implementation.
RICS board chair Martin Samworth said: “This update is a logical evolution for valuation practice. The new provisions on rotation are aligned with other similar requirements for audit. The amendment will help to enhance the integrity, transparency and robustness of all valuations conducted in accordance with the RICS Red Book provisions, underpinning it as the global valuation standard. These changes are also appropriate for the continued good governance of our profession.
“I am proud of the significant work that RICS, its members, staff and partners in industry have undertaken to deliver this crucial update. We look forward to engaging with firms across the industry to make this transition as efficient and thorough as possible.”
Nigel Clarke, interim chair of the RICS Standards and Regulation Board, added: “RICS is proud to lead on the regulation of the built environment, and these innovative changes to our standards serve the public good and will grow confidence in the sector. They will increase the trust clients have in the standards of the UK’s valuation profession, which sits among the most respected in the world.”
