Navigating the 2023 RICS Red Book UK National Supplement.
FIONA HAGGETT BSc (Hons) FRICS, Sava Trainer
Introduction
In the ever-evolving landscape of property valuation, the RICS Red Book stands as a crucial guide for professionals in the field. The latest iteration is the UK National Supplement, published in October 2023, and effective from May 1, 2024. This document serves as an essential subset of the Red Book Global Standards, which is under review and expected to be updated in early 2025. The UK National Supplement adapts the global standards for specific application within the UK, ensuring compliance with national laws and addressing unique market conditions.
The Structure of the UK National Supplement
The Red Book Global Standards cover the higher-level elements of valuation, but the UK National Supplement deals with the standards as they apply within the UK. It is the local application of the global standards for the UK, and it comes in four parts. (Note: if you go to the RICS website you will see that there are other local jurisdiction guides intended to reflect the valuation practice relevant for that jurisdiction.)
The UK National Supplement is divided into four main parts:
1. Introduction: This section provides a general overview but is less relevant for professionals already familiar with the Red Book.
2. UKPS (Professional and Valuation Standards): Here, valuers are reminded of their duty to comply with UK law, a fundamental requirement for all professionals.
3. UK VPS (Valuation Practice Statements): These are mandatory standards that must be adhered to by all valuers. 4. UK VPGA (Valuation Practice Guidance Applications): While these are labelled as advisory, deviating from them requires strong justification, making them effectively mandatory in practice. (An approach to take would be to take ‘advisory’ as being mandatory unless you have a very good reason not to comply.)
Key Focus on Residential Valuation
For residential valuers, the most pertinent section is UK VPGA 11, which addresses the valuation of UK residential property. This section is directly linked to VPGA 2 of the Red Book Global Standards, detailing how secured lending valuations should be conducted within the UK context. There are other sections relevant to housing and residential property, notably UK VPGA 14, which covers Valuation of Registered Social Housing for Loan Security Purposes, and UK VPGA 15, Valuations for Capital Gains Tax, Inheritance Tax, Stamp Duty Land Tax.
Uniformity in Valuation Advice
A significant emphasis of VPGA 11 is on maintaining uniformity in the advice given by valuers across the UK. Whether working for lenders or private clients, consistency in applying the valuation standards is crucial to ensure that valuations are reliable and comparable.
Role of the Valuer
The valuer’s role, as outlined in VPGA 11, involves advising clients on the nature of the property, highlighting any factors likely to materially affect its marketability and value. This includes assessing market value, market rent (for buy-to-let properties), and noting any assumptions or special assumptions made during the valuation process. The focus is on identifying issues that have a material impact on value, rather than conducting a detailed survey.
Inspection and Investigation Guidelines
VPGA 11.2 covers the basis of valuation, with market value being the primary focus. The inspection process, outlined in VPGA 11.3, specifies that valuers should inspect all visible parts of the property from ground level and adjacent public areas. Roof space inspections are generally not required unless deemed essential by the valuer due to potential impacts on market value. Health and safety considerations may also influence whether such inspections are conducted. However, it is essential to remember that while a roof inspection may not be mandatory under VPGA 11.3 you may find that lender clients do require a roof space inspection, so it is always essential to check specific lender requirements before the job is undertaken to. Also, when you are completing the inspection, you should supplement what you see on site by additional information, often found online, which in your professional judgment eis relevant to the service being provided.
VPGA 11.4 and 11.5 delve into the importance of identifying defects that could have a material impact on value. This is a valuation and not a survey so will not involve such a comprehensive inspection as, say, a Level 2 inspection carried out on behalf of a purchaser. Valuers must use their judgment to determine whether further investigations are necessary, focusing on defects which may have a material impact on value rather than minor issues. If you can’t inspect a specific area, it is only appropriate to request further investigation if you have a particular concern or suspect a defect that could impact on value. There’s no need to take extra steps just to cover yourself. Document any inaccessible areas in your site notes.
Assumptions and Reporting
Assumptions and special assumptions, covered in VPGA 11.6, should be used sparingly and only when necessary. Valuers are expected to make reasonable inquiries before resorting to these assumptions, and any assumptions used should be clearly documented in both the site notes and the final report.
The subsequent sections of VPGA 11 (11.7 to 11.12) address the reporting process, treatment of incentives, reinstatement cost estimates, and the implications of valuation within a defined marketing period.
Supporting Guidance
The UK National Supplement is supported by additional guidance documents that provide more detailed advice on specific valuation scenarios. These documents, previously separate from the Red Book, have now been integrated to ensure consistency and avoid duplication of information.
Conclusion
The Red Book UK National Supplement is an essential tool for valuers operating within the UK. It not only aligns UK practices with global standards but also addresses the unique legal and market conditions present in the UK. For residential valuers, understanding and applying the guidelines in VPGA 11 is crucial for delivering consistent, accurate, and legally compliant valuations.
As the global standards evolve, particularly with the upcoming 2025 update to the Red Book Global Standards, staying informed and adapting to these changes will be essential for all valuation professionals. The UK National Supplement provides a solid foundation, ensuring that UK valuers remain at the forefront of best practices in the industry.
