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com
Why is it necessary to have rules and regulations, etc. in the
preparation of valuations?
These are necessary because valuations form the basis of many financial decisions and
consequently there have to be consistent standards. More recently there has been a move
towards greater transparency, accountability, comparability and the availability of information -
the need for which was given added impetus following major corporate failures, particularly,
but not exclusively, in the US. RICS wants to maintain public confidence in the work of its
members by means of self-regulation.
The Red Book is divided into practice statements, appendices
and guidance notes. Are they all mandatory?
A practice statement must be followed and is mandatory as is the commentary which
accompanies it:

'The commentary to each practice statement should be considered to have mandatory
status when it requires the member to take a specified action.' (PS 1.1, para. 4)

On the other hand appendices are advisory unless indicated to be mandatory in the practice
statement to which it relates.

Guidance notes are not mandatory but are designed to help the valuer with the application of
the practice statements and describe the standard of work that is expected of a reasonably
competent surveyor.
Does the Red Book apply to a purchase report that does not
contain a valuation but merely recommends a purchase at a
certain figure that has been negotiated at, above or below market
value?
If the advice to purchase at a specific figure is not presented as a valuation then the report is
outside the Red Book but it is still subject to the Rules of Conduct for RICS members, so it
would be good practice to follow all the appropriate advice in the Red Book.
I carry out estate agency work which involves advising clients on
asking figures and recommending acceptance of offers usually in
writing. Is this subject to the Red Book?
Advice given in connection with estate agency is one of the principal exceptions in the Red
Book. PS 1.2, para 10, states:

'Advice tendered in the expectation of, or in the course of an instruction to dispose of, or
acquire, an interest in property on the anticipated price achievable or payable, including
advice on whether a particular offer should be accepted or made. This exemption does not
apply if the client requires a purchase report that includes a valuation.'
I am director of property at a large publicly quoted company. I
am frequently asked to advise the directors on the value of the
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company's properties. Is this advice subject to the Red Book?
You are an internal valuer and as such, provided none of the advice you give including the
valuation figure is to be seen or communicated to a third party or appear in any publication,
this falls outside the Red Book. Remember, however, this does not exempt you from the RICS
Rules of Conduct and you would be advised to follow the spirit of the Red Book where
appropriate. However, the company may still be entitled to rely on the advice given and
therefore it is advisable to clearly set out the limitations on advice provided and any
assumptions made in estimating the price obtainable.
I understand there is some flexibility in the Red Book and
departures are allowed. Can you explain the procedures?
It has long been recognised that there may be circumstances when it is not entirely practical to
give a client all the advice he or she needs by strict adherence to the Red Book. This is dealt
with in PS 1.3.

The procedure is that a departure is allowed if you feel that it is justified and the situation
cannot be covered by making a 'special assumption', but the Red Book issues a warning that
you may be called upon by the RICS or the Institute of Revenues Rating and Valuation (IRRV)
to explain your reasons. Clearly the circumstances have to be agreed with your client in the
terms of engagement and the details and reasons and the client's agreement must be set out
in the report.
My client wants a valuation which is to be incorporated into his
company's accounts but says he doesn't want a long Red Book
valuation report. What should I tell him?
Firstly, if the valuation is for his accounts, as a chartered surveyor you have no option but to
produce a valuation and report which is Red Book compliant.

Secondly, his auditors will probably insist that it is a professional valuation if they are to sign off
the accounts.

Thirdly, a Red Book report for accounts does not have to be long providing it contains the
minimum contents as outlined in PS 6.1. It can be concise and there is no requirement to
provide photographs, location plans or detailed descriptions of the property and its environs.

One reason for your client's request could be that he feels you will charge less for a shorter
report.
How can I provide written confirmation of my opinion given in a
verbal report without agreement of terms of engagement and a
full report in accordance with PS 6?
Example context: I am often approached by a bank seeking a verbal desktop valuation of a
property upon which they are contemplating making a loan. The bank, following my verbal
report, may ask me to confirm my opinion in writing but do not at this stage require a Red Book
compliant report as the terms of the loan are still being negotiated. How can I provide written
confirmation without agreement of terms of engagement and a full report in accordance with
PS 6?

Any valuation in writing is subject to the Red Book. The best way forward is to develop a
simple engagement letter which incorporates the minimum Red Book requirements together
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with confirmation that the property has not been inspected, total reliance is made on
information supplie and, it is preliminary advice to consider whether a loan should be made,
which may lead to a full Red Book report in due course. In addition, in the absence of the
usual due diligence, the preliminary figure may be subject to change and should not be relied
upon for any contractual purpose.
The Red Book is divided into global and UK standards - I work
in the UK, so is it in order for me to ignore the global standards?
The global standards apply throughout the world and are the core of the Red Book - they apply
equally in the UK as anywhere else. You are required to apply global valuation standards
unless there is a more specific national practice statement.

The UK standards (UKPS 1 to UKPS 5) cover valuation situations, rules and regulations in the
UK such as UK listing rules, takeover code, property unit trusts and UK accounting
conventions, etc. It is expected that RICS national associations outside the UK will devise their
own standards within the Red Book framework.
My client, a company within an EU country outside of the UK,
requires a valuation for the accounts of a UK subsidiary carried
out in accordance with international valuation standards. May I
do this?
On the assumption you hold the necessary qualifications, knowledge and skills (PS 1.5) the
matter is dealt with in PS 4.1 which states that:

'Valuations for financial statements prepared under International Financial Reporting
Standards (IFRS) shall be in accordance with the IVSC International Valuation Application 1
(IVA 1).'

This is published by the International Valuation Standards Committee as part of the
International Valuation Standards and contains information on International Accounting
Standards (IAS) including the important IAS 16 (Property Plant and Equipment), IAS 17
(Leases) and IAS 40 (Investment Property).

You will report the Market Value under IVA 1 but your client is required under International
Financial Reporting Standards (IFRS) to account for the asset at its 'fair value'. To enable your
client to do this and to make disclosures required under IAS 16 and IAS 40 your report must
contain the following information:

- the effective date of the revaluation;
- whether the valuer is an external or internal valuer;
- the methods and significant assumptions applied in estimating market value;
- under IAS 16 the extent to which the values were determined by reference to
observable prices in an active market or recent market transactions on arm's length
terms, or were estimated using other valuation techniques; and
- under IAS 40 the method and significant assumptions applied in determining the
value of investment property, including a statement whether the determination of fair
value was supported by market evidence or was more heavily based on other
factors because of the nature of the property and lack of comparable market data.

You must indicate if you are an internal or external valuer as defined in the glossary to the Red
Book.

The report must include a statement that the valuation has been prepared in accordance with
IVA 1.

You should consider Appendix 6.3 (Reporting valuations under IFRS) which explains the
current lack of clarity in the International Standards and the recommendation that when valuing
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owner occupied property you should provide valuations on the alternative assumptions that
either it is sold:

- as part of the continuing enterprise in occupation; or
- on the assumption that the property is sold following a cessation of the existing
operation.

My client has sent me various plans showing different designs
for a proposed development and asked me to provide valuations
of each when completed and let. Is this advice subject to the Red
Book?
Formerlyone of the exceptions was market and other advice in connection with the design of
development improvement and conversion schemes and as an element of grant applications.
This exception no longer applies and the valuation advice proposed would be within the remit
of the Red Book.
Can anyone who is not a chartered surveyor undertake a
valuation in accordance with the Red Book?
The rule in PS 1.4 is that:

'Each valuation to which these standards apply must be prepared by, or under the
supervision of, an appropriately qualified member ...'

It would appear from a literal translation of this that only chartered surveyors can undertake
Red Book valuations, but a non-member can carry out a valuation if supervised by a member.
However the report has to be signed by the member who accepts responsibility for it (
Appendix 6.1(s)). A valuation could be undertaken and signed by a non-member but the client
would not have the protection of disciplinary procedures against the valuer if the valuation was
found subsequently to be faulty.
May I delegate the inspection and due diligence work for a
valuation in accordance with the Red Book to an unqualified
assistant?
Yes you may. Provided you consider this to be appropriate in the circumstances of the
instruction; the assistant is under your supervision; and you take responsibility for the
valuation, but remember as in the previous question that this will require you to sign the report.
My practice is in Wales and it specialises in retail property. I
have been asked to value an office property in Edinburgh. May I
do this or should I sub-instruct a local valuer?
PS 1.5 states that the member 'must have sufficient current local, national and international (as
appropriate) knowledge of the particular market'.

If you practise in Wales specialising in a different class of propertyit seems unlikely you would
meet the criteria set out. The safest procedure would be to sub-instruct (with your client's
authority) a local valuer.
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May I instruct another valuer with the required level of expertise
without first getting my client's approval?
No. Paragraph 3 of the commentary to PS 1.5 states:

'The client's approval must be obtained if the valuer proposes to employ another firm to
provide some of the valuations that are the subject of the instruction.'

Rather than sub-instruct, some valuers prefer their client to instruct the other valuer and then
combine his or her report with their own.
I have been asked to value a property for my client's annual
accounts that I acquired for him nine months ago. Is it in order
for me to do so?
This situation is covered by UKPS 5.3. A valuation for accounts is such a valuation and the
Red Book stipulates that if you or your firm negotiated the purchase of a property on behalf of
a client within 12 months preceding the date of valuation you may not undertake a valuation
unless another firm unconnected with your firm has provided a valuation of the property at the
time of acquisition or subsequently.

'Where a regulated purpose valuation includes:
(a) one or more properties acquired by the client within the twelve months preceding the
date of valuation; and
(b) the member, or the member's firm, has in relation to those properties:

- received an introductory fee;
- or negotiated that purchase on behalf of the client

the member shall not undertake a regulated purpose valuation of the property, or properties
identified under (a) above, unless another firm unconnected with the member's firm has
provided a valuation of that property for the client at the time of, or since, the transaction was
agreed.' (UKPS 5.3)

So unless another firm has provided an interim valuation you must wait 12 months before
valuing. This rule stems from a recommendation in the Carsberg Report and you cannot get
round this by disclosure.
I have been asked by a bank to value a property for mortgage
purposes that I acquired for the bank's customer two months ago.
Is it in order for me to accept this instruction?
You must disclose any previous, current or anticipated involvement with the prospective
borrower or the property to be valued to the bank (Appendix 4.4, para. 3.4). You must
consider whether your previous involvement with the property compromises your duty to be
independent and objective. If by accepting the instruction this would create a conflict that
cannot be avoided the instruction should be declined.

Providing all this is disclosed to the bank and the bank is comfortable you may accept the
instruction. Banks are often happy to accept such conflicts in the interest of speed and a
possible saving on fees.
Can you explain the meaning of 'Chinese walls'?
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The Red Book rules are set out in Appendix 1.1, para. 5.4. They can be defined as a
procedure to manage conflicts of interest whereby different parts of a firm are kept separate so
that information does not circulate freely. Chinese walls are unlikely to work without
considerable planning as their management needs to be an established part of a firm's culture.
It will be more difficult or may be impossible for smaller firms or offices to operate them.

'RICS has strict guidelines on the minimum standards which must be adopted by
organisations when separating the advisers acting for "conflicting" clients. Any "Chinese
wall" set up must be robust enough to offer no chance of information passing through it.
This is a strict test. Taking "reasonable steps" to operate an effective wall is not sufficient.
Accordingly, any "Chinese wall" set up, and agreed to by affected clients, must ensure that:

- the individual(s) acting for conflicting clients must be different. Note that this extends
to secretarial and other support staff;
- such individuals or teams must be physically separated, at least to the extent of
being in different parts of a building, if not in different buildings;
- any information, however held, must not be accessible to "the other side" at any time
and, if in a written form, must be kept secure in separate, locked accommodation to
the satisfaction of the compliance officer, or another senior independent person
within the firm;
- the compliance officer, or other senior independent person, should oversee the
setting up and maintenance of the "Chinese wall" while it is in operation, adopting
appropriate measures and checks to ensure it is effective. The compliance officer
must have no involvement in either of the instructions, and should be of sufficient
status within the organisation to be able to operate without hindrance;
- there should be appropriate education and training within the firm on the principles
and practice relating to the management of conflicts of interest.'

A client for whom I have carried out a valuation has asked for
details of comparables. Some of these are not in the public
domain and are only known to me by working for another client.
May I pass on this information?
Where this information is contemporary and not reduced in relevance by age, the answer has
to be no. You might consider giving non-specific information, or asking the first client if you
may release the information. Most clients will be impressed by your confidentiality.
My client wishes to discuss the valuation with me before I sign
off. May I do this?
PS 6.11 lays down the conditions upon which preliminary valuation advice is submitted. Yes,
you may have a meeting but you must keep very careful notes of any additional information
provided by your client and whether or not that information has affected the final valuation. It is
important that any discussions do not, and can be shown not to lead to any perception that the
valuer's opinion has been influenced by those discussions other than to correct inaccuracies or
the provision of further information.
I have been asked to value a property for mortgage purposes that
belonged to my wife's family three years ago. Do I need to
disclose this to the bank?
After three years this is probably irrelevant but it would be safer to make a disclosure.
I have been asked by a client to value an investment property
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which he owns for his annual accounts. I find that my firm is
acting for the major tenant in an ongoing rent review negotiation.
May I accept the instruction and if so what action must I take?
There is clearly a conflict and whilst you may accept the instruction (by disclosing the position
to both parties and obtaining their confirmation in writing) it would probably be unwise to do so.
I have been asked by a client to value a property for accounts
purposes on which my firm gave planning advice to the previous
owner some three years ago. May I accept the instruction?
Providing you have disclosed this previous involvement to your client it seems unlikely that this
would compromise your independence, integrity and objectivity and there should be no reason
why you cannot take on the instruction.
My client wants me to increase my valuation due he says to
commercial pressures from shareholders in the company of
which he is the managing director. How should I react to this
request?
You should explain to your client that professionally you can only provide your honest opinion
which reflects the market at the date of valuation. Unless he can produce relevant information
of which you are unaware you are not able to adjust your valuation. You should record your
discussions with your client on the file.
I have undertaken valuation assignments outside my area of
work but of a class of property with which I am familiar. I
carefully reserach the market and speak to local valuers. Is this
sufficient to comply with PS 1.5 Knowledge and skills?
If you refer to the commentary to PS 1.5 this states that if the valuer does not have the
required level of expertise then he or she should decide what assistance is needed
assembling and interpreting relevant information from other professionals such as specialist
valuers, accountants and lawyers.
Do I have to obtain my client's written agreement to the terms of
engagement?
Under PS 2.1 the terms of engagement must be confirmed to the client prior to issuing the
report. Clearly it's not practical to insist that the client agrees in writing, but sending two copies,
one to sign and return can be helpful. A telephone or e-mail response should be noted on the
file.
I do frequent valuations for the same client. Do I have to send
him written terms of engagement for each instruction?
The best way forward is to have standard terms of engagement to which you can refer when
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you acknowledge the instruction and confirm the fee and timetable. If any special assumptions
were required you could confirm these at the same time.
May I extend the terms of engagement beyond those set out in
the Red Book?
The20 matters referred to in PS 2.1 are the minimum matters that must be agreed. There are
other matters that, from a business perspective, you may wish to include such as the date for
delivery of figures, the number and type of report required, etc.
I have been asked by a client to provide a valuation in the
capacity of an independent valuer. There is no such definition in
the Red Book, so what should I do?
Previous editions of the Red Book contained several different definitions some of which were
included in statute and regulations. In your instance you need to discuss the precise criteria
required with your client and confirm this in the terms of engagement and check that there is
not a definition already in existence for the required purpose. Remember that the RICS Rules
of Conduct already require you to act with independence, integrity and objectivity.
My client wants me to assume a hypothetical planning consent
when valuing his property. Is this a special assumption?
This is almost certainly a special assumption particularly if a potential purchaser of the
property would not make that assumption in the marketplace at the date of valuation.
Remember, valuing with special assumptions may only be made if they can reasonably be
regarded as realistic, relevant and valid. If valuing for a bank you would be well advised to
include a second valuation without the special assumption so that its effect can be
demonstrated.
I have been asked by a client for a 'forced sale value', how should
I advise him?
Forced sale value as a basis of valuation was abolished some time ago and is a term which
generally arises in difficult economic conditions when there are few willing sellers and it is
thought that most transactions are by vendors who, for various reasons, are being compelled
to sell.

Such sale prices are then considered to be unrepresentative of the market, as invariably the
seller is under pressure to achieve a sale as quickly as possible. This is a false assumption.
An obligation to sell by a certain date is not necessarily incompatible with achieving market
value because of the assumption in the definition which requires the seller to be motivated to
sell at the terms available in the market at the valuation date.

The degree of pressure on the seller will depend on the consequences for him of not selling on
that date and therefore the discount he would accept. There is nothing to prevent a valuer from
giving advice in such circumstances and this can generally be achieved by making a special
assumption - for instance, that the marketing period is constrained. This is a commercial
judgment and is more likely to be advice to the vendor reflecting his particular circumstances.
Do not use the term 'forced sale value' (PS 2.3).
I value the same property for a client every year. Do I need to
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inspect it on each occasion?
This is a matter of professional judgment but providing your client confirms that there have
been no material changes to the property or its locality an annual inspection is unnecessary.
However, the terms of engagement must state that this procedure has been agreed and you
are relying on the confirmation from your client.
A client has asked me to consider the veracity of a valuation
prepared by another valuer, may I do this?
The rule is that a valuer must not review another valuer's work that is intended for publication
or disclosure unless the valuer is in possession of all the facts and information available to the
first valuer. The reasons for this are obvious. If on the other hand the full facts and information
are not available but a review of files or an audit process is required for internal purposes, this
is acceptable (PS 2.6).
I am rather concerned about the accuracy of a valuation due to a
weak market and lack of relevant comparables. May I report a
range of figures?
For some valuations, particularly those prepared for financial statements, a single figure must
be reported. However, there is nothing to stop the valuer from commenting on the robustness
of his or her figure and the reasons for the potential uncertainty. If reporting to a bank there is
more scope for reporting a higher and lower figure and this could be further illustrated by using
special assumptions for different circumstances. Do not use qualifying words such as 'in the
region of' without further comment. GN 5 gives very helpful advice on both identifying
uncertainty and reporting it.
I have just valued a portfolio of properties where I believe the
value of the entirety is greater than the sum of the individual
properties, should I report the higher figure?
You should report both values: firstly, the individual values for each property and then the
value of the portfolio as a whole. Portfolios of pubs and hotels dependent on market conditions
can have an aggregate value higher than the sum of the individual parts. Where a portfolio has
been valued on the assumption that it would be sold as a single entity the reported market
value will be in respect of the whole group and any breakdown of the market value between
the individual properties should be expressed as such with a statement that this notional
apportionment does not necessarily equate to the market value of the interest in any individual
property (GN 3).
A client has asked me to value a property on the basis of open
market value; why is this no longer defined?
In line with the RICS policy of supporting International Valuation Standards, open market value
has been replaced in the Red Book by the international definition of market value (PS 3.2).
Open market value as a definition has consequently been withdrawn.
What is the difference between open market value and market
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value?
Whilst the wording is very different and the market value definition considerably shorter there
should be no difference in a valuation of a property using either definition. A client can be
assured that a property valued by reference to open market value would produce the same
figure if valued using the market value definition (UKPS 1.1, para. 8).
It is not unknown in the economic cycle for the market to
collapse and for there to be a complete absence of purchasers.
Does the existence of a 'willing purchaser' allow me to ignore
this?
PS 3.2.4 explains that the buyer '... purchases in accordance with the realities of the current
market and with current market expectations ...'. For there to be a sale there has to be a
purchaser and in reality whatever the state of the market there is always a figure at which
somebody will deal - remember the present property owner is included among those who
constitute the market. Also remember that a reverse payment or premium will generally
produce a purchaser.
In the open market value definition the additional bid of a special
purchaser was specifically excluded. Using the market value
definition may I now take special purchasers into account?
It is very important to read the market value definition together with the conceptual framework
of the IVSC definition that goes with it. PS 3.2 explains that the words 'in an arm's-length
transaction' mean that there is no particular or special relationship between the parties that
could lead to an inflated value because of an element of special value.

The commentary goes on to say that 'hope' or 'marriage value' may only be included to the
extent that it would be reflected by prospective purchasers in the general market. This is a
similar approach to the definition of open market value.
Can you please explain the difference between special value and
synergistic value?
Special value is an amount in excess of market value that would be paid by a purchaser for
whom the property had a particular value not shared by others. Examples include an adjoining
owner to the property or a purchaser rolling over Capital Gains Tax.

On the other hand synergistic value is the additional value created by the combination of two
or more interests where the value of the combined interest is worth more than the sum of the
original interests. This is frequently known as marriage value.
What is the essential difference between existing use value and
market value?
The major difference is that market value is a pure valuation basis designed to reflect the price
at which a property should sell in the marketplace assuming certain conditions. On the other
hand, existing use value is a basis of valuation designed to reflect the price at which a property
should be held in an owner's accounts.

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The definition of existing use value therefore makes additional assumptions to reflect the
concept of the ongoing business - including ignoring development potential, personal planning
consents and contamination that do not affect the continuation of the existing use and for
which there is no obligation to remedy.

The result is that existing use value could be the same, higher or lower than market value. For
example, a leasehold property held at a low rent but with a complete bar on assignment would
have only a limited market value, if any, but if assessing the existing use value the bar on
assignment would be ignored and the value would be higher. Conversely, a nursing home with
extensive grounds with planning consent for development which could only be implemented by
demolishing the buildings on site would have a higher market value than the existing use
value. For more detailed advice on the concepts see VIP No. 1 Valuation of Owner-Occupied
Property for Financial Statements.
Explain when I should use market value and when I should use
existing use value.
Existing use value is the onlybasis for valuation under UK Generally Accepted Accounting
Principles for non-specialised properties that are owner occupied for the purpose of the entity's
business (UKPS 1.1). Most other valuations are assessed by reference to market value.
Depreciated replacement cost is now reported as market value.
Surely depreciated replacement cost is used only when there is
no market, so how can this be?
Many have argued that it was incorrect for RICS to describe depreciated replacement cost as
a separate basis of value in previous editions of the Red Book, as it described a method, not a
distinct basis. The background to this debate lies in accounting standards.

For many years UK accounting standards have required specialised property, valued using
depreciated replacement cost, to be separately reported in accounts. The rationale was that
users of the accounts needed to be aware that the valuations of such specialised assets were
not based on transactional evidence and therefore were potentially less reliable. An
unintended consequence of this was that many people came to think of depreciated
replacement cost as an alternative to valuation, not merely a different valuation approach.

Under International Accounting Standards, no such distinction is made. Under IAS 16 the fair
value of an asset is normally based on 'market-based evidence' or, in the case of a specialised
asset, it may be assessed using either the income or depreciated replacement cost approach.
In other words three different approaches, or methods, may be used to arrive at the required
basis. The problem of conveying the reliability of the valuations to users is dealt with by the
requirement to make disclosures as to the valuation approach adopted.

Market Value is a concept that simply describes the relationship, motivation and behaviour of
the hypothetical parties to a transaction. It does not specify or imply a particular method of
valuation, and like fair value, can be estimated using any of the three different approaches
described in IAS 16. Whenever the depreciated replacement cost approach is being used, the
valuer should be ensuring that, as far as possible, all inputs should be based on the market,
and not on criteria specific to the actual owner.
A property valued using depreciated replacement cost
methodology may have a value for an alternative use that is
higher or lower if the current use were to cease. Do I have to
report this?
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Both potential situations should be reported. If the alternative use valuation for the property
can be readily identified; is commercially and legally feasible; and is materially higher, it should
be reported. If the value cannot readily be assessed then a statement that the property may
have potentially higher value would be sufficient. However, if the value would be materially
lower if the business ceased this should be drawn to the attention of the client (PS 6.7). It is
important also to state that the alternative use valuation ignores the costs of business closure
or any other costs.
What qualifications do I have to report with a valuation based on
depreciated replacement cost?
In the private sector the valuation should be accompanied by a statement that the valuation is
subject to the adequate profitability of the business paying due regard to the value of the total
assets employed (PS 6.5).

In the public sector the valuation should be accompanied by a statement that it is subject to
the prospect and viability of the continued occupation and use (PS 6.6).

In both instances it is up to the client to consider the effect of these qualifications.
Who has the ultimate responsibility for deciding whether a
property should be valued by depreciated replacement cost?
Firstly, the valuer must be satisfied that it is not practicable to prepare a valuation by any other
method and, secondly, he or she should agree this with the client.
I value two identical properties in similar locations using the
depreciated replacement cost method of valuation. Should a
difference in output be reflected in my valuations?
In the circumstances you describe, wherethe first property is working to 100% capacity
andthe second is only working to 60% capacity, the replacement cost of the properties would
be similar but the valuations are made 'subject to the adequate profitability of the business
paying due regard to the value of the total assets employed' (PS 6.5). It is the directors who
have the responsibility to apply this test and therefore they may reduce the value of the second
property to reflect this on the grounds of profitability. VIP No. 10 The Depreciated
Replacement Cost Method of Valuation for Financial Reporting, describes the technical
approach to such valuations.
When undertaking a valuation for accounts under FRS 15
(Tangible Fixed Assets) should I make an adjustment in my
valuation for costs of purchase or sale?
FRS 15 requires the reporting of notional directly attributable acquisition costs, where material
to the existing use value. Likewise, where property is surplus to the entity's requirements and
valued on the basis of market value it requires, the amount of expected directly attributable
selling costs, where material, should be reported. The Red Book states in UKPS 1.7 that:

'The member must not include directly attributable acquisition or disposal costs in the
valuation. Where asked by the client to reflect costs these must be stated separately.'
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I have been asked by a client to provide a fair value for his
annual accounts; what is this?
The term fair value is derived from International Accounting Standards and is the valuation
approach to the measurement of assets and liabilities. It is expressed in most of the
International Accounting Standards as:

'... the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable willing parties in an arm's-length transaction.'

Whilst the wording incorporates some of the language of market value, fair value is not
supported by a detailed conceptual framework and is more of a generic term without any
guidance for its application. The International Accounting Standards stipulate that:

'... the fair value of land and buildings is usually determined from market based evidence by
appraisal that is normally undertaken by professionally qualified valuers. The fair value of
items of plant and equipment is usually their market value determined by appraisal.'

This is why the International Valuation Standards and Red Book tell the valuer to report market
value.
What is the difference between market value and fair value?
It is difficult to give an explicit answer as although the definition of market value is well
understood and explained in detail in the Red Book, fair value has no internationally
recognised definition or conceptual framework - in spite of being widely used in financial
reporting and transfers of business assets.

The main distinction from market value is the concept of fairness, i.e. the price must be one
that, taking into account all the circumstances, is fair to the particular parties in a transaction -
it can, for example include special value. In contrast market value has no regard to whether
either of the parties regard the price as 'fair', it is simply the price obtainable in the general
market.

In many cases a 'fair' price will be market price, but this is not always the case. In the context
of accounting standards, some limited additional direction is given. In IAS 16 fair value should
normally be based 'on market evidence' and in IAS 40 fair value should reflect 'current market
conditions'.
Is fair value covered by the Red Book?
Appendix 6.3 dealing with valuations under International Reporting Standards deals with the
difficulty of interpreting fair value with reference to IAS 16 and advises that, pending
clarification of fair value, where there is a significant difference in the value of owner-occupied
property either on the assumption that it is sold:

- as part of the continuing enterprise in occupation; or
- it is sold in isolation after removal of the business in occupation,

market value should be reported on both assumptions (see also PS 3.5).
Can you explain why some valuations are governed by
International Financial Reporting Standards (IFRS) and some by
UK Generally Accepted Accounting Principles (UK GAAP)?
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This depends under which rules your client is preparing his accounts. Companies listed on a
stock exchange within the European Union have to prepare consolidated accounts in
accordance with EU adopted IFRS for accounting periods commencing on or after 1 January
2005. In the UK any company not listed on its stock exchange reporting under the Companies
Act 1985 may also prepare its accounts under IFRS.
May I assume a property is free from contamination even if I
believe it is not? Is this a special assumption?
Unless you know the property is contaminated you can agree with your client in the terms of
engagement to disregard any potential contamination. However if you suspect that the
property is contaminated disregarding this would be a special assumption and would have to
be agreed with your client in the terms of engagement and highlighted in your report and any
published reference to it.
May I agree with my client to disregard any possibility of
contamination in a property?
Yes, in fact most valuations are undertaken on this basis but usually after the valuer has made
some preliminary enquiries with the owner and/or local authority. You would need to agree this
in your terms of engagement with your client. Possible wording might be as follows:

'In preparing our valuation, unless otherwise advised or our inspection reveals matters to
the contrary, we will make an assumption that no contaminative or potentially contaminative
use is or has been carried out at the property.

Unless specifically instructed we do not undertake any investigation into the past or present
uses of either the property or any adjoining or nearby land to establish whether there is any
potential for contamination from these uses and will make an assumption that none exist.

Should it subsequently be established that any contamination exists at the property or on
adjoining land or that any premises have been or are being put to contaminative use, this
may have a detrimental effect on the value reported.'

If the property was clearly affected by contamination an assumption of absence would involve
making a special assumption that would need to be agreed with the client.
I value many industrial buildings with corrugated asbestos roofs;
how should I qualify my valuation report?
The best advice would be to draw your client's attention to the roof and suggest that he or she
may wish to take specialist advice but that similar properties change hands and there is an
acceptance by the market of such properties. Since 2003 owners and occupiers of business
property are required to have management plans in place and it would be sensible to ask for
the survey and see what this reveals (Control of Asbestos at Work Regulations 2002). You
should comment that maintenance, repairs and alterations may be significantly increased due
to the need to take appropriate precautions under the regulations.
To what extent do I need to verify information provided by my
client?
If in your terms of engagement you have agreed to rely on this there should be no need for
further verification but clearly you should not rely on information that is blatantly incorrect. You
should record in your report the information supplied, relied on, and the source.
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To what extent may I rely on information supplied by my client's
other advisers, i.e. lawyers, managing agents, etc.?
Again if in your terms of engagement it is agreed that you should do so you can rely on it. You
would be well advised to schedule in your report your sources of information.
Do I need to read leases?
This depends on your instructions and what you have agreed in your terms of engagement. If
you were valuing a property with a considerable number of tenants such as a shopping centre
it would be sensible to see a sample lease and likewise if valuing a leasehold interest a review
of the lease would be good practice. If valuing a large portfolio, particularly for accounts,
reading every lease would be impractical and reliance on the client's tenancy schedule would
be more normal.
My client has asked me to rely on the floor areas that he has
supplied; may I do this?
Yes, but you should agree this with your client in the terms of engagement and refer to it in
your report. It is good practice to check areas against gross error when conducting your
property inspections.
My client having received my report has asked for further
information on the detail behind some of the figures; may I give
him this information?
This is not an uncommon request and clients frequently ask for details of rents and yields, etc.
You are perfectly at liberty to provide this information and the format in which you provide it is
entirely up to you as it is not covered by the Red Book.
My client says he does not want a long valuation report; may I
write him a simple letter and call it an 'informal valuation'?
If your client requires a valuation that comes under the jurisdiction of the Red Book (most
valuations do - for exceptions see PS 1.2) he will have to receive a report in accordance with
PS 6 of the Red Book. A report that complies with the minimum reporting requirements in PS
6.1 can be very brief and need not include building descriptions, photographs, location plans,
etc. Valuers are discouraged from describing valuations as 'formal' or 'informal' as these terms
may give rise to the misunderstanding of unstated assumptions applicable in either case. It
should be noted that a valuer is just as liable for an opinion expressed informally as formally.

The Financial Services Authority Listing Rules allow a condensed report in certain
circumstances (UK appendix 2.1, para 2.2).
If my valuation were made using a 'special assumption' how
should I deal with this in my report?
PS 6.4 states that the special assumption must be set out in full together with a statement that
it has been agreed with the client. Remember that special assumptions may only be made if
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they are realistic, relevant and valid for the particular circumstances of the valuation (PS 2.2).
Again, depending on circumstances, it is worth considering providing a valuation without the
special assumption to show the effect of it, particularly if reporting to a bank.

Remember also that any published reference to the report must include reference to the
special assumption. Valuations prepared for financial statements are unlikely to incorporate
special assumptions.
How do I report a property with a 'negative value'?
Negative values do occur from time to time particularly in the case of leasehold interests or
contaminated property. It is important to remember that they must be shown separately in the
report and not aggregated with properties showing a positive value. (PS 6.8)
How should I incorporate the valuation of a sub-valuer?
The appointment of another valuer with specialist skills needs to be agreed in the terms of
engagement with the client. You may prefer that your client instructs him or her directly but
either way a valuation from another valuer incorporated in a report needs to be accompanied
by a statement that it has been prepared in accordance with the Red Book or such other
standards as may be appropriate (PS 6.10).
May I submit a preliminary report to my client?
This procedure needs to be dealt with very carefully. It is quite in order to do so providing the
report includes the information that:

- it is a draft subject to the completion of the final report;
- the advice is provided for the client's internal purposes only; and
- the draft is on no account to be published or disclosed.

If, as is likely, discussions with the client take place after submission of the preliminary report,
it is vitally important to keep clear file notes including noting any additional information
provided or suggestions made and how these affected the final valuation (PS 6.11).
My client says he may wish to refer to my valuation report in his
published accounts; what action and consent do I have to give
him?
The procedure for thisis discussedunder publication statementswith suggested suitable
wording (PS 6.12 and Appendix 6.2).

You must submit with your report a suitable draft statement for your client to include in the
notes to his accounts. The precise wording will depend on the purpose of the valuation and
may be governed by rules issued by local regulatory bodies.

You should ensure that you see a final proof to ensure the wording is correct and you should
return this to your client if correct with a letter consenting to the reference to your name and
report appearing in the document. If the report contains any special assumptions or any
departures from the Red Book then it is essential that these should be included in the
reference.
What is an assessment of worth?
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This is a basis of value defined in the Red Book as:

'The value of property to a particular owner investor, or class of investors, for identified
investment or operational objectives.'

Worth is more a tool for analysis than a valuation. Its origins go back to the Mallinson Working
Party on commercial property valuation that recommended 'the development of a definition of
worth as a valuation basis inviting the Investment Property Forum to lead research into
techniques of assessing and expressing worth'. Worth may be the same as the amount that
could be realised from the sale of an asset, this value is specific to a particular party and
reflects the benefits received by holding the asset. See also RICS Information Paper
Calculation of Worth.
How do I report an assessment of worth?
If you provide an assessment the important matter is that under no circumstances should it be
described as a valuation and a statement must be made that the figure is not a market value (
PS 3.4).
Who may sign a valuation report?
The rule is that the person taking responsibility for the report must sign it. It is not acceptable
to sign with the name of a firm but the person taking responsibility may sign on behalf of the
firm (Appendix 6.1(s)).
Should my report be dated the same date as the valuation date?
The definition of market value is time specific as of a given date. Markets rarely stand still and
a valuation of a property as of today in theory could be different from one made yesterday or to
be made tomorrow. A possible exception to this would be if a specialist property lender
requested exit values on expiry of a loan or in the case of lease financing transactions - in
such cases the requirement for clear agreed assumptions is paramount.

If the valuation date is the date of the report the date must be specifically referred to in the
report to avoid any confusion. Alternatively a statement that the date of valuation is the date of
report is acceptable.

'If there has been a material change in market conditions, or the circumstances of a property
or portfolio between an earlier date of valuation and the date of the report, the member must
draw attention to this.' (Appendix 6.1(g))
I valued a property for a client for accounts purposes 12 months
ago. He has asked me for an update for his year-end accounts.
May I do a simple letter referring to the previous valuation and
confirm my latest opinion of value?
You should agree your terms of engagement for the new instruction in the usual way
confirming that you will be making the assumption that there have been no material changes to
the property and the area. Your report should contain this assumption and it would be in order
to refer to your previous report without repeating the minimum contents in PS 6.1.
What disclosures are required in a report for a regulated purpose
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valuation?
'Where a valuation is a regulated purpose valuation the member shall state all of the
following in the report and any draft published reference to it:

(a) the length of time the member continuously has been the signatory to valuations
provided to the client for the same purpose as the report, together with the length of time
the member's firm has continuously been carrying out that valuation instruction for the
client;
(b) the extent and duration of the relationship of the member's firm with the client;
(c) in relation to the firm's preceding financial year the proportion of the total fees, if any,
payable by the client to the total fee income of the member's firm expressed as one of the
following:

- less than 5%; or
- if more than 5%, an indication of the proportion within a range of 5 percentage
points; and

(d) where, since the end of the last financial year, it is anticipated that there will be a
material increase in the proportion of the fees payable, or likely to be payable by the
client, the member shall include a further statement to that effect in addition to (c) above.'
(UKPS5.4)
Why are there so many disclosures?
The idea is to enable a third party reading the report or any reference to it to be alerted to the
length of time that the valuer has been dealing with the instruction and consider whether the
valuer's firm is unduly dependent on the client for its income. Although the RICS Rules of
Conduct require a member to act with integrity and avoid conflicts of interest, there is no
requirement to disclose the working relationship with the client. It is all part of the movement
towards greater transparency and the maintenance of public confidence in the valuation
process as advocated by the Carsberg working party.
Does the Red Book apply to commercial property mortgage
valuations?
Yes, these were brought within the ambit of the Red Book in the 4th edition. Previously banks
had always wanted to retain the right to instruct valuers on any basis then thought appropriate.
Secured lending valuations are dealt with in PS 4.2.
Are there other matters that should be included in a secured
lending report other than the 19 matters in PS 6.1?
If you refer to Appendix 4.4, para.5 you will find a list ofsix other matters that would normally
be included in a report. These include: disclosure of any involvement identified in the terms of
engagement, valuation methodology, transaction history and suitability of the property for
secured lending.

Para. 5.2 contains a list of other matters which, subject to the particular circumstances, may be
appropriate, including advice on alternative uses, occupational demand, repairs, environmental
hazards, marketability of the property, comparables, etc.

There is a further list of matters which may be addressed for different types of property, i.e.
owner-occupied, investment property, property which is to be developed or refurbished, etc.,
together with some typical special assumptions.
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The borrower has asked for a copy of the report I sent to the
lender; may I make this available to him?
The lending institution is your client having instructed you to undertake the valuation albeit that
the borrower is probably paying for it. The correct procedure is for the lending institution to
either pass a copy of the report to the borrower if they wish to or to ask you to send it to the
borrower on their behalf.
The lender has asked his solicitors to send me title documents to
review and to confirm that nothing therein affects my valuation.
Am I allowed to comment not being a qualified lawyer?
The title documents contain the definitive information on the property such as plot plans, lease
extracts, details of rights of way, etc. It is a normal procedure to be asked to check that the
information you have used for your valuation coincides with the title. You do not need to be a
qualified lawyer for this and can always ask for an explanation from the solicitors on any matter
that is unclear.
I still get requests from banks for valuations using estimated
realisation price and estimated restricted realisation price as a
basis. What action should I take?
All the major banks supported the abolition of these bases but it takes them some time to
change their internal rules. The action you should take is to inform the instructing bank that
their letter is out of date and ask them to check with their head office.
What is the appropriate valuation basis when valuing commercial
property for secured lending?
PS 4.2, para. 2 stipulates that valuations for secured lending shall normally be on the basis of
market value except when otherwise governed by law or statute.
The expression 'forced sale value' is still used yet the Red Book
says (PS 2.3) it must not be used, but what am I to do if clients
ask for it?
The banks were anxious to abolish this expression because a forced sale assumed an
unreasonable period in which to make a sale. This was considered to be in conflict with the
banks' duty of care to the borrower and other creditors.

A client asking for advice on the basis of a forced sale is really asking what will be the
diminution in market value if the sale period is unreasonable which would be a special
assumption. If this advice is required it would be sensible to understand the circumstances in
which it is required and explain that if the vendor is willing to accept a price below the market
value a quick sale is more likely.
Is the RICS HomeBuyer Survey and Valuation covered by the
Red Book?
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UKPS 4.1 provides that the HSV service procedures take precedence over the Red Book.

'Members who provide the HSV Service must comply with the practice notes published by
RICS Books. In particular the standard documentation and report form must be used without
alteration as set out in the second edition practice notes.' (UKPS 4.1, para. 3)
What is a regulated purpose valuation?
There are valuations that although provided for a client may be relied upon by third parties.
The majority of valuations will come under this heading with the important exception of
valuations for secured lending. The full list of the five valuations is contained in UKPS 5.1 and
includes valuations for financial statements, for inclusion in prospectuses and circulars to be
issued by UK companies, valuations in connection with takeovers and mergers, valuations for
collective investment schemes and for unregulated property unit trusts.
What is a Financial Statement?
This is defined in the glossary to the Red Book as:

'Written statements of the financial position of a person or a corporate entity, and formal
financial records of prescribed content and form. These are published to provide information
to a wide variety of unspecified third party users. Financial statements carry a measure of
public accountability that is developed within a regulatory framework of accounting
standards and the law.'
I am a sole principal and am in some difficulty in complying
with the (UKPS 5.2) requirement for rotation of personnel. What
should I do?
The Red Book deals with this problem and makes a suggestion that to comply with the
principles of the statement it would be permissible for you to arrange for a periodic review of
the valuation at intervals of not more than seven years. This would demonstrate that you were
taking steps to ensure that objectivity was maintained and thus retain the confidence of third
parties. Remember that if you adopt this policy it must be included in your terms of
engagement.
I understand I may not undertake the valuation of a property for
12 months if my firm has received an introductory fee or
negotiated the purchase on behalf of a client. Can you please
explain this?
Firstly, this restriction only applies to regulated purpose valuations. You could (if they were
happy after you had made full disclosure of your firm's involvement) undertake a valuation for
a bank. If you were undertaking a regulated purpose valuation it is highly likely this would be
relied upon by somebody other than the entity commissioning it, i.e. a third party.

The idea behind this restriction is to remove any threat to objectivity and the perception that a
valuer is unlikely to contradict or disagree with previous advice which his firm had given. This
restriction would not apply if your firm had acted for the vendor of the property and received a
fee although you would need to disclose this.
I understand I have to make certain disclosures in any report
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when undertaking a regulated purpose valuation. What are these?
These are set out in UKPS 5.4 and in summary are as follows:

1. the length of time the valuer has been continuously responsible for the valuation
instruction;
2. the length of time the valuer's firm has been undertaking the valuation instruction;
3. the extent and duration of the relationship between the valuer's firm and the
client; and
4. the fee earning relationship between the valuer's firm and the client expressed in
5% bands to total turnover.

Remember that it is not only the report in which these disclosures have to be made but also in
any published reference to it.
Do I need to refer to the disclosures in my terms of engagement?
In UKPS 5.2 the only regulated purpose valuation matter that has to be included in the terms
of engagement is a statement of the firm's policy on the rotation of the valuer who accepts
responsibility for those valuations and a statement of the quality control procedures that are in
place. However, it would be sensible to state in your terms of engagement that when
undertaking a regulated purpose valuation you are required by RICS to state certain
disclosures in your report.
Are valuations for SIPPS (Self Invested Pension Plans) regulated
purpose valuations?
No. A SIPP is a tax approved scheme that is not otherwise regulated and is therefore not a
regulated purpose valuation.
My client is a big international firm with many subsidiaries for
whom my firm acts throughout the world and researching all the
fees paid or about to be paid is almost impossible. How detailed
do my enquiries need to be to conform to Disclosure (c)?
This was always envisaged to be a potential problem and is dealt with in some detail in UKPS
5.4. It acknowledges that it is impossible to establish and evaluate every relationship but it is
nonetheless the valuer's responsibility to make reasonable enquiries and to ensure that the
principles of the statement are adhered to. It also points out that it is frequently the valuer's
commercial relationship with a party other than the instructing client that could create a
perceived threat to independence.

Where there is a material connection or relationship with the client the disclosures relate to the
relationship of the valuer's firm with all the parties involved and the aggregate fees earned
from those parties. UKPS 5.4, para. 8 gives examples of parties other than the instructing
party which should be taken into account in making the disclosure, including:

- subsidiaries of an instructing holding company;
- where instructions are from a subsidiary company, those other companies
connected by the same holding company; or
- a third party issuing valuation instructions as agent for different legal entities, for
example, the manager of a property fund.

The onus is on the valuer to make adequate enquiries bearing in mind the size and nature of
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the valuation instruction.
How detailed does the extent and duration relationship disclosure
((b)) need to be?
This is dealt with in UKPS 5.4, para. 5 which says members are not required to provide a
comprehensive account of all work ever undertaken by their firm for the client. A simple,
concise statement that discloses the nature of other work done and the duration of the
relationship, is all that is required. If there is no relationship, other than the valuation instruction
in question, a statement to that effect should be made. There is also a requirement to keep a
note of the enquiries made and the source of the information which should be kept on file.
Do the regulated purpose valuation disclosures have to be
included in any published reference to the valuation, for example
in my client?s accounts?
Yes. UKPS 5.4 states 'where a valuation is a regulated purpose valuation the member shall
state all of the following in the report and any draft published reference to it'. It then goes on to
list the disclosures. Remember you will have to incorporate in the same reference those
matters referred to in Appendix 6.2.
Valuations of property held in pension fund schemes is not
included in the list of regulated purpose valuations in UK PS 5.1.
Are these valuations excluded?
If the pension scheme is within the regulations produced by the Financial Services Authority
then it is clearly a regulated purpose valuation. Alternatively if the pension scheme is run by
an entity incorporated as a company, subject to the Company's Act, and the valuation is for
financial statements, it would be a regulated purpose valuation.
Why do valuations need to be monitored?
RICS through itsRules of Conduct and the Red Book imposes on its members the obligation
to act with integrity, objectivity and independence. However, fears were raised, particularly in a
study published by the Universities of Reading and Nottingham Trent, that clients might be in a
position to influence their valuers. This fear was exacerbated by various scandals in the
auditing world mainly concerning American companies where auditors were accused of having
cosy relationships with the management of public companies and not carrying out rigorous
audits. This was put down to the lucrative fees charged for non-audit work from the same
clients.

RICS in anticipation of potential problems, and what was known as the 'moral hazard' facing
valuers asked Sir Bryan Carsberg, a chartered accountant and former head of the Office of
Fair Trading, to chair a working party to consider the valuation process in a number of areas
particularly the maintenance of confidence in valuations and the reliability of the system by
clients and others using or affected by them.

Recommendation 17 of the Carsberg Report read:

'RICS should create a Valuation Monitoring Committee to create and manage a Review and
Monitoring System in accordance with the principles set out, and make amendments to the
Red Book to enforce the system.'

From this recommendation RICS developed the concept of regulated purpose valuations and
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the associated disclosures and procedures for monitoring.
Which valuations are subject to the monitoring process?
The original list comprised the five valuations set out in UKPS 5 as follows:

1. Valuations for Financial Statements;
2. Valuations for incorporation into Listing Particulars and Circulars;
3. Valuations in connection with Takeovers and Mergers;
4. Valuations for Authorised Unit Trusts;
5. Valuations for Unregulated Property Unit Trusts.

These valuations all might be relied upon by third parties other than those to whom the
valuation report is addressed. However RICS is to extend monitoring to all valuations.
How are valuers selected to be monitored?
Members are asked whether they have undertaken any regulated purpose valuations in the
previous 12 months. Those that reply positively will be picked at random for the monitoring
process.
Will the monitoring process involve consideration of the
valuation produced?
The purpose of the exercise is to monitor whether the member has complied with the
requirements of the Red Book with special emphasis on compliance with the requirements of
UKPS 5. It is not within the remit of the monitoring exercise to consider or comment upon the
accuracy of the valuations produced.
Where does the monitoring take place?
This will be in the valuer's office.
Is the valuer interviewed or is it just an inspection of the file?
The valuer will be asked to present his or her file for inspection which will invariably result in
some dialogue.
What guarantees does the valuer have that the file will remain
confidential?
The monitor will give a signed undertaking that the information obtained during the monitoring
exercise will be used by RICS solely for the purpose of the administration of the institution's
conduct and disciplinary regulations. It will not be disclosed to any other party, including RICS
staff members, not concerned with the administration of the regulations. In the event of any
disciplinary action taken by RICS against the member, the identity of the client and the
properties will be removed from documentation submitted to any disciplinary panel.
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What are the penalties if the valuer does not pass the inspection?
If the failure is due to minor breaches these will be discussed with the valuer who will have the
opportunity to comment and no further action will be taken. On the other hand, serious
breaches will be discussed with the valuer and referred to the Head of Regulation for
consideration.
My client has asked me to prepare a valuation for probate
purposes. What should I give him?
He undoubtedly requires a valuation for inheritance tax. You should, when confirming
instructions, make it clear that since you understand the valuation is required as part of the
procedure for obtaining a Grant of Probate the basis of valuation will be in accordance with the
statutory definition.
I am frequently asked by clients seeking valuations for capital
gains tax or inheritance tax to provide high or low valuations to
suit their particular taxation circumstances. How should I deal
with such requests?
If you are approached to produce what is sometimes known as 'a made to measure valuation'
you should explain that you are bound by the RICS Code of Conduct to act with
'independence, integrity and objectivity' and you can only provide your honest view in
accordance with the statutory definition and case law. You should also explain to your client
that property valuations are subject to scrutiny by district valuers on behalf of HM Revenue
and Customs and if this leads to negotiation which results in a materially different tax
assessment there could be a claim for interest or other penalties.
Surely every valuation is subject to a range and in practice I
could provide a bottom of the range figure for inheritance tax
and a top of the range figure for capital gains tax if that was
appropriate?
This is a matter of professional judgment but you must act in accordance with the RICSRules
of Conduct. The fact of the matter is that the same property valued at the same date for either
inheritance tax or capital gains tax should be at the same figure. In some cases statute law
provides that the same figure shall be adopted.
What is the correct basis of valuation to use when advising a
charity on the purchase of a property?
There is no basis of valuation laid down in the various statutes or in the Charity Commission
advice but as a chartered surveyor is required to carry out the report it clearly envisages
market value as defined in PS 3.2.
I am advising a charity on the purchase of a freehold property on
which they hold a lease and the price they are paying is above
market value. How should I advise them?
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You should provide the trustees with the market value but separately advise them on the worth
to the charity and the reasons for proposing to pay in excess of Market Value.
Are valuations prepared for local authority accounts regulated
purpose valuations?
No, they are covered by their own SORP (Statement of Recommended Practice) which is dealt
with in UKPS 1.12.
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