The Red Book Flashcards
What is the Red Book Global? (RICS Valuation - Global Standards 2021) effective from 31st Jan 2022
This is a set of global valuation standards created to achieve high standards of integrity, clarity and objectivity in adopting valuation best practice
How is the Red Book structured?
P1 - Introduction
P2 - Glossary
P3 - Professional Standards
P4 - Valuation Technical & Performance Standards
P5 - Valuation Applications
P6 - The International Valuation Standards
What is included in Part 3 - RICS Professional Standards?
- Compliance with standards and practice statements
These standards and practice statements are all mandatory with an exception to the following:
VPS 1 - Advice is provided in preparation or during a negotiation or litigation
VPS 2 - The valuer is performing a statutory function except for a valuation for a statutory return to a tax authority (Compulsory Purchase etc)
VPS 3 - Valuation provided for a client for internal purposes, without liability and can’t be communicated to any third party
VPS 4 - Valuation provided is part of agency work in anticipation to receiving an instruction to dispose or acquire an asset (except when a purchase report is required)
VPS 5 - The valuation advice is provided in anticipation of giving evidence as an expert witness
- Ethics, Competency, Objectivity and Disclosure
- Undertake valuations in accordance with Rules of Conduct
- Manage conflicts
- Comply with ToE
What is included in Part 4 - Valuation Technical & Performance Standards (VPS)?
VPS 1 - Terms of Engagement
These much be confirmed in writing prior
- Identify valuer, client, the asset, the currency, purpose of the valuation, basis of value, and the valuation date.
- Detail the assumptions and special assumptions to be made
- Confirmation of Red Book Global compliance
- Fee basis
VPS 2 - Inspection, Investigation and Records
These are the extent necessary to produce a valuation
When dealt with restricted information valuer should consider:
1. Restriction must be agreed in ToE
2. Implication in value due to the restriction in writing before value reported
3. If restriction is reasonable with regard to the purpose of valuation
4. Restriction referred to in report
VPS 3 - Valuation reports
Minimum requirements are the same as ToE but include:
- Valuation approach and reasoning
- Valuation figure(s)
- Comment on market uncertainty
VPS 4 - Basis of Value, Assumptions and SA’s
Valuer must determine the basis of value that is appropriate for every valuation to be reported (i.e. Market Value; Market Rent; Fair Value; Investment Value)
VPS 5 - Valuation Approaches and Methods
- Valuers are responsible for choosing and justifying their valuation approach and use of model
What is included in Part 5 - Valuation Practice Guidance Applications (VPGA)?
VPGA 1 - Valuation for inclusion in financial accounts
VPGA 2 - Valuation for secured lending
- any involvement with the prospective borrower or property to be valued must be disclosed to the lender
- previous involvement means within last 2 years
VPGA 8 - Valuation of real property interests
- Emphasis of ESG, environmental constraints and sustainability issues that have a direct impact on values e.g. storm/flooding
VPGA 10 - Matters that may give rise to material valuation uncertainty (e.g. COVID)
What is included in Part 6 - International Valuation Standards 2017?
- General Standards - addresses: ToE, approaches / bases / methods of value
- Asset Standards - provides requirements relating to specific types of assets, such as real property and development property
What have been some key changes to the updated ‘Red Book Global’?
- Increased focus on sustainability
- Valuation for financial reporting
- Reference to use the profits method for self-storage & flexible work space
What is the RICS Valuation - Global Standards (UK National Supplement, 2018)?
This is a document which augments the red book global and provides specific requirements for Valuations undertaken in the UK, it contains 18 Valuation Practice Guidance Applications (UK VPGAs)
How is the UK Red Book Global (national supplement) structued?
Part 1 - Introduction
Part 2 - UK Professional and Valuations Standards (mandatory)
> UK VPS 3 - Regulated purpose valuations - Valuations relied on by a third party and are subject to valuation monitoring, applies to valuations for 5 purposes:
1) Financial Reporting (company accounts)
2) Stock Exchange listings
3) Takeovers and mergers
4) Collective investment schemes
5) Unregulated property unit trusts
Part 3 - UK Valuation Practice Guidance Applications (advisory)
> Key UK VPGA’s include:
UK VPGA 1 = Valuation for financial reporting
UK VPGA 8 = Valuation for charity assets
UK VPGA 9 = Relationship with auditors
UK VPGA 10 = Valuation for commercial secured lending purposes
UK VPGA 11 = Valuation for UK residential property
UK VPGA 14 = Valuation of registered social housing for loan security purposes
UK VPGA 15 = Valuation for CGT, Inheritance Tax, SDLT and ATED
Key changes to the RICS Valuation - Global Standards (UK National Supplement, 2018)?
Easier to read, more user friendly with clear advice on what is mandatory
Not a substitute to the Red Book Global
New UK VPGAs include the valuation of central government assets, local authority assets and registered social housing
New section on valuation for commercial lending
Emphasis on need for clear ToE which make it clear it is red book compliant
