Top 10 Revision Tips - Red Book (Part 1)

Posted on 15 / 05 / 18
by Jen Lemen

Top 10 Revision Tips - Red Book (Part 1)

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This week, we are going to take a look at our top 10 revision tips relating to the Red Book, otherwise known as RICS Valuation - Global Standards 2017. We will look at further tips in Part 2 and also the UK Edition of the Red Book in future articles.


1. Mandatory or advisory?

Make sure you know which sections of the Red Book are of mandatory or advisory application:

  • Professional Statements - PS 1-2 - these are mandatory for all members providing written valuations.
  • Valuation Technical and Performance Standards - VPS 1-5 - these are mandatory unless otherwise stated (see 2. below). VPS 1, 4 and 5 focus on technical standards, whilst VPS 2-3 focus on performance and delivery.
  • Valuation Practice Guidance Applications - VPGA 1-10 - these are advisory and provide guidance on best practice. They typically relate to valuations for specific purposes or of specific asset types, e.g. financial statements, secured lending, trade related property and portfolios. 

2. When does the Red Book apply?

The Red Book applies to written valuations, including the provision of an Automated Valuation Model (AVM) output. It does not apply to estimated replacement cost figures for insurance purposes. For oral valuation advice, the principles of the Red Book should still be observed as liability cannot be avoided in this way. 


3. When do VPS1-5 not apply?

There are no exemptions from compliance with PS 1-2 when providing valuation advice. However, there are 5 specific circumstances where VPS 1-5 may be unsuitable or inappropriate to comply with:

  1. Providing agency or brokerage advice for an acquisition or disposal
  2. Acting as an expert witness
  3. Performing statutory functions
  4. Providing a valuation purely for internal purposes, without liability and without communication to a third party
  5. Providing valuation advice in the course of negotiations or litigation where the valuer is acting as an advocate

4. What pre-instruction checks should I carry out?

Before accepting an instruction, you need to ensure you comply with PS 2 - Ethics, competency, objectivity and disclosures:

  • Check you are sufficiently competent, knowledgable and experienced to provide the required valuation advice
  • Ensure no conflicts of interest exist or that they are managed appropriately (check out our blog article)
  • Undertake the required Money Laundering checks on your client
  • Issue Red Book compliant Terms of Engagement (see VPS 1) and hold a signed copy on file

5. Do any additional disclosures apply?

Certain types of valuation require additional disclosures to be made (under PS 2):

  1. Published financial statements
  2. Stock exchange
  3. Publication, prospectus or circular
  4. Investment schemes
  5. Takeovers or mergers

The additional disclosures may include the following:

  • Relationship with the client and previous involvement
  • Rotation policy
  • Time as signatory
  • Proportion of fees

For secured lending valuations, modified or extended requirements may apply under VPGA 2.


6. What should I include in my Terms of Engagement?

VPS 1 (Terms of Engagement - scope of work) sets out what you need to include in your Terms of Engagement:

  • Identification and status of the valuer
  • Identification of the client(s)
  • Identification of other intended users
  • Identification of the asset(s)/liability(ies) being valued
  • Currency
  • Purpose
  • Basis of value (see VPS 4)
  • Valuation date
  • Nature and extent of investigations and limitations
  • Nature and source of information relied upon
  • Assumptions and special assumptions
  • Format of the report
  • Restrictions on use, distribution and publication
  • Confirmation of compliance with IVS
  • Fee basis
  • Reference to Complaints Handling Procedure
  • Statement relating to monitoring by RICS
  • Any limitations on liability agreed

7. Do I need to verify information I rely upon in my valuation?

Effectively, yes. VPS 2 (Inspections, investigations and records) confirms that you must take 'reasonable steps to verify the information relied on in the preparation of the valuation and, if not already agreed, clarify with the client any necessary assumptions that will be made. While a client may request, or consent to, an assumption being relied on, nevertheless if – following inspection – the valuer considers that such an assumption is at variance with the observed facts, then its continued adoption could, providing that it is realistic, relevant and valid for the particular circumstances of the valuation become a special assumption'.


8. Can I revalue without reinspecting?

Revaluation without reinspection cannot be undertaken unless you are satisfied that there have been no material changes to the physical or locational nature of the property since the last valuation. See Section 2 of VPS 2 for further specific detail.


9. What do I have to include in my valuation report?

VPS 3 (Valuation reports) sets out what you need to include in your valuation report:

  • Identification and status of the valuer
  • Identification of the client(s) and other intended users
  • Purpose
  • Identification of the asset(s)/liability(ies) being valued
  • Basis of value (see VPS 4)
  • Valuation date
  • Extent of investigations
  • Nature and source of information relied upon
  • Assumptions and special assumptions
  • Restrictions on use, distribution and publication
  • Confirmation of compliance with IVS
  • Valuation approach and reasoning
  • Amount of the valuation (s)
  • Date of the valuation report
  • Commentary on material uncertainty
  • Any limitations on liability agreed

10. Where do I find definitions of key Red Book terminology?

Make sure you know the definition of key terminology within the Red Book, e.g. assumption, special assumption, Market Value, Market Rent, Fair Value and special purchaser. These are all contained within Part 2 (Glossary) of the Introduction to the Red Book. We will look at these further in future articles. 


How can I prepare effectively for my final assessment submission and interview this Spring?

  • Sign up for a complimentary copy of our Ebook Guide to the APC (UK and MENA editions)/AssocRICS or our new APC Hot Topic Guide for Spring 2018 - full of even more helpful advice and tips to pass your RICS APC or AssocRICS with flying colours first time
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  • If you're confused about anything, just contact us on 07804 642 825 / rachel@property-elite.co.uk. We offer all candidates a free & friendly 30 minute RICS APC consultation

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Stay tuned for our next blog post to help build a better you

N.b. nothing in this article constitutes legal advice.